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Roberta De Stefani
- 7 January 2025
- ECONOMIC BULLETIN - ARTICLEEconomic Bulletin Issue 8, 2024Details
- Abstract
- NextGenerationEU (NGEU) is the largest ever programme of the EU and aims to support its economic recovery after the pandemic crisis and to modernise economies, with a focus on digital and green transformation. This article provides an updated description of the implementation effort as well as an assessment by ECB staff on the impact on the euro area economy. Based on a variety of models and scenarios, it is estimated that the public expenditures and structural reforms linked to NGEU will have a positive impact on euro area output, while the impact on inflation is expected to be muted. The expected positive effect on potential output should help reduce government debt ratios, as projected for the main beneficiary euro area countries. Compared with the initial assessment by ECB staff from 2022, the macroeconomic impact of NGEU is expected to materialise later but to be of similar size. Delays in the implementation of NGEU-linked expenditures and reforms are the key factor behind this reprofiling. The cumulated estimate remains broadly unchanged in the presence of two opposite forces: first, an increase in the nominal RRF-related investment financing grants to euro area countries and second, the unanticipated inflation which eroded the real value of the funds.
- JEL Code
- C54 : Mathematical and Quantitative Methods→Econometric Modeling→Quantitative Policy Modeling
E02 : Macroeconomics and Monetary Economics→General→Institutions and the Macroeconomy
E22 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Capital, Investment, Capacity
E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
F45 : International Economics→Macroeconomic Aspects of International Trade and Finance
H87 : Public Economics→Miscellaneous Issues→International Fiscal Issues, International Public Goods
O52 : Economic Development, Technological Change, and Growth→Economywide Country Studies→Europe
- 2 December 2024
- OCCASIONAL PAPER SERIES - No. 362Details
- Abstract
- This paper takes stock of the implementation of the NextGenerationEU (NGEU) programme in the euro area four years after its inception, focusing on its principal instrument, the Recovery and Resilience Facility (RRF). The paper provides an updated quantitative assessment of its past and future impact on the euro area economy, using a set of models and scenarios to account for the uncertainty that still surrounds the implementation of this programme. The public expenditures and structural reforms linked to the RRF have the potential to increase the level of euro area gross domestic product (GDP) by around 0.4-0.9% by 2026 and 0.8-1.2% by 2031, depending on capital productivity and the degree of absorption of RRF funds. The contribution of structural reforms to these output effects is expected to increase over time, while the initially prevailing impact of RRF-funded public expenditures fades away. We provide tentative empirical evidence that reforms have started to modestly improve the growth outlook of some euro area Member States by increasing their institutional quality. The expected long-run increase in output is in turn a key factor behind the decline in the government debt ratios we project for the main NGEU beneficiary euro area Member States. At the same time, we estimate that NGEU will have a limited impact on euro area inflation. Compared with previous ECB staff analysis published in 2022, the macroeconomic impact of NGEU, particularly on GDP and government debt ratios, is expected to shift over time due to widespread delays in the implementation of NGEU-linked expenditures and reforms. It is crucial that euro area Member States address implementation challenges over the remaining lifetime of this programme to fully reap its benefits.
- JEL Code
- C54 : Mathematical and Quantitative Methods→Econometric Modeling→Quantitative Policy Modeling
E02 : Macroeconomics and Monetary Economics→General→Institutions and the Macroeconomy
E22 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Capital, Investment, Capacity
E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
F45 : International Economics→Macroeconomic Aspects of International Trade and Finance
H87 : Public Economics→Miscellaneous Issues→International Fiscal Issues, International Public Goods
O52 : Economic Development, Technological Change, and Growth→Economywide Country Studies→Europe
- 24 June 2021
- ECONOMIC BULLETIN - BOXEconomic Bulletin Issue 4, 2021Details
- Abstract
- This box documents the misalignment between the surge in global demand for semiconductors and their limited global supply. The semiconductor chip shortage poses constraints on euro area manufacturers, particularly in industries relying on semiconductors, such as the computer, electronic, electrical equipment and automotive industries. So far, there is only limited evidence regarding the effects of the shortage of semiconductors on euro area price pressures.
- JEL Code
- F10 : International Economics→Trade→General
D24 : Microeconomics→Production and Organizations→Production, Cost, Capital, Capital, Total Factor, and Multifactor Productivity, Capacity
E23 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Production
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation
- 10 April 2017
- OCCASIONAL PAPER SERIES - No. 185Details
- Abstract
- The euro area sovereign debt crisis has highlighted the importance of reducing public debt levels and building up sufficient fiscal buffers during normal and good times. It has also reaffirmed the need for a thorough debt sustainability analysis (DSA) to act as a warning system for national policies. This paper introduces a comprehensive DSA framework for euro area sovereigns that could be used for analysis of fiscal risks and vulnerabilities. Specifically, this framework consists of three main building blocks: (i) a deterministic DSA, which embeds debt simulations under a benchmark and various narrative shock scenarios; (ii) a stochastic DSA, providing for a probabilistic approach to debt sustainability; and (iii) other relevant indicators capturing liquidity and solvency risks. The information embedded in the three main DSA blocks can be summarised in a heat map, which can provide guidance on the overall assessment of risks to debt sustainability. This method reflects the need to have a broad-based assessment, cross-checking information and perspectives from various sources with a view to deriving a robust debt sustainability assessment.
- JEL Code
- E62 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Fiscal Policy
H62 : Public Economics→National Budget, Deficit, and Debt→Deficit, Surplus
H63 : Public Economics→National Budget, Deficit, and Debt→Debt, Debt Management, Sovereign Debt
H68 : Public Economics→National Budget, Deficit, and Debt→Forecasts of Budgets, Deficits, and Debt
- 19 November 2014
- OCCASIONAL PAPER SERIES - No. 157Details
- Abstract
- In the light of the lessons learned from the euro area sovereign debt crisis, the EU fiscal and macroeconomic governance framework was overhauled in 2011. Against this background, this paper analyses whether the broadened surveillance of fiscal and macroeconomic indicators under the strengthened governance framework would have facilitated the identification of emerging imbalances, had it been in place before the crisis. The findings suggest that the strengthened governance framework would have given earlier signals about emerging excessive fiscal and macroeconomic imbalances. Euro area countries thus would have been obliged to take preventive and corrective action at an earlier stage, provided that the stricter rules had been effectively implemented. At the same time, the paper concludes that the increased reliance of the EU fiscal governance framework on unobservable magnitudes such as the structural budget balance, which are difficult to measure in real time, will continue to impede the timely identification of underlying fiscal imbalances. It is suggested that the new macroeconomic imbalance procedure could have given earlier indications about the emergence of excessive macroeconomic imbalances, which in turn posed risks for fiscal sustainability. Looking forward, these preliminary findings suggest possible synergies between the, until now largely unrelated, fiscal and macroeconomic governance frameworks.
- JEL Code
- H3 : Public Economics→Fiscal Policies and Behavior of Economic Agents
H6 : Public Economics→National Budget, Deficit, and Debt
E02 : Macroeconomics and Monetary Economics→General→Institutions and the Macroeconomy
E61 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook→Policy Objectives, Policy Designs and Consistency, Policy Coordination