Publications

The use of Next Generation EU can become one of the main determinants of Spanish economic developments in the coming years. This article analyses the economic impact of the European Regional Development Fund over the last 20 years, on account of the similarity between its goals and those of Next Generation EU and the available information. The findings suggest that those structural reforms that reduce barriers to competition in the product market and some labour market rigidities can scale up the European funds’ expansionary effect (fiscal multiplier) in the medium and long term.

In the year since the onset of the pandemic caused by COVID-19, the International Monetary Fund (IMF or the Fund) has granted loans and emergency financing to over 85 countries, an unprecedented number. In the past, a shock on this scale would have brought the issue of the sufficiency of its resources centre-stage. However, on this occasion, given the characteristics of the loans granted, the IMF’s general resources have not been excessively squeezed. Pressure has been greater on the concessional resources granted to low-income countries. Against this background, the IMF’s general and concessional resources have two different needs to contend with. In the case of the former, the IMF has the leeway to respond to any future increase in the demand for ordinary financing and, if necessary, it could activate its temporary resources. Conversely, in the case of the latter, it must ensure there are sufficient resources to avert stiffer concessional financing terms for the most vulnerable countries, in what is the most complicated economic juncture of recent decades. The IMF should obtain new borrowed resources as these countries progressively replace emergency assistance with conditional financing.

In December 2020 the European Council approved the regulation establishing the European Union (EU) Multiannual Financial Framework for 2021-2027 and the Next Generation EU recovery facility. Both mechanisms will help provide in the coming years for financing worth €1.8 trillion to sustain the EU’s post-pandemic recovery and its long-term priorities. To set the scale of these funds and the challenge of managing them in context, this article firstly describes the European Structural and Investment Funds. It then offers a detailed analysis of the amount and composition of the resources received to date under these funds, along with their distribution by type of expenditure in the biggest EU countries, with particular emphasis on Spain. Lastly, given the regional focus of the allocation criteria, the final section of the article dissects the course, composition and distribution by type of expenditure of these funds among Spain’s different regions.

The extraordinary fiscal policy response to mitigate the strong economic impact of the COVID-19 pandemic has pushed public debt notably higher, exceeding its peak levels of the last five decades in the main advanced economies. Additionally, support for the economic recovery will foreseeably require maintaining a sizeable fiscal impulse in the short term. In this setting, announcing medium-term plans to rebalance public finances would be suitable, according to the studies available. These plans recoup the countercyclical room for manoeuvre of fiscal policy, as well as anchor economic agents’ expectations and reduce the potential risks of high government indebtedness for future economic activity. This article describes the example of the United Kingdom, the first country to propose a gradual fiscal adjustment programme for the medium term, while maintaining public support for the economic recovery in the short term.