According to a conclusion of a new study, much more money, on a relative basis, is being spent by Germany than many other countries such as the United States in its efforts to counter the economic impact of the novel coronavirus pandemic.
An economic revival package that is worth more than half of its gross domestic product last year has been announced by the country – the largest European economy. The package includes provisions for some immediate fiscal stimulus, deferrals and other liquidity measures. Compared to this, the total worth of the fiscal plan announced by the United States so far is worth only about 15 per cent of the total GDP of the country in 2019.
Germany is going to need “as much support as possible” and it has “the fiscal space” to do it, Zsolt Darvas, a senior fellow at the Brussels-based think tank Bruegel and one of the authors of the data study, said during a television interview.
All the fiscal pledges made by 11 countries so far were combined for analysis by the think tank. The countries include Germany, France, Italy, the U.K., Denmark, the U.S., Spain, Greece, the Netherlands, Hungary and Belgium. The data considered by the researchers includes all the government announcement that were made by the countries till April 18.
Germany leads the pack with an announcement of a package of 236 billion euros ($256 billion) in direct fiscal impulse measures. The package includes 100 billion euros for recapitalizing and buying stakes in corporates that have been severely affected bty the viral pandemic. It also includes a sum of 50 billion euros in direct grants to smaller businesses. The country also pledged about 500 billion euros in tax deferrals and 1,322 billion euros in other liquidity and guarantee measures.
In comparison, according to Bruegel’s study, the United States, the largest economy of the world, has announced a coronavirus pandemic related package of that includes $1.17 trillion in immediate stimulus, $561 billion in deferrals, and $877 billion in other liquidity and guarantee measures.
Their fiscal programs will depend on the duration of the crisis, Darvas said. “I can imagine the U.S. will do more,” he said.
A “cautious” approach has been adopted in stepping up their immediate contributions by those European countries with more limited fiscal space, shows the data, according to Darvas. For example only about 0.9 per cent and 1.1 per cent of their GDP of 2-019 has been committed by the governments of Italy and Spain respectively as part of their immediate relief package for the pandemic.
The Italian government chose to opt for a larger share of tax deferrals to support the economy which was worth about 13 per cent of the GDP of the country in 2019. That means that both tax paying individuals and companies do not need to pay certain taxes or pay in reduced amount for some period of time.
(Adapted from CNBC.com)