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A Closer Look at Global Fiscal Packages

14 April 2020   |  

Governments globally have responded to the ongoing COVID-19 pandemic variously—some have effectively shuttered their economies, full stop; others have taken less radical approaches (like Sweden). Similarly on the fiscal front, some governments have passed sweeping spending packages aimed at dulling a full shutdown’s likely economic impact. Top of this list in terms of scale is the US, where Congress passed and the President signed a roughly $2 trillion aid package on 27 March 2020. In the intervening weeks (yes, it’s only been weeks—believe it or not), some countries have followed suit—in intention if not in magnitude. Japan’s cabinet approved a $1 trillion package on 7 April. The EU is struggling to agree on a €500 billion package (more on the EU momentarily). 

The composition of these packages provides some insight into the way various governments are thinking about the current economic environment. The US package (which politicians on both sides of the aisle are already concerned isn’t enough) focuses heavily on small businesses and beefing up unemployment. Exhibit 1 compares 2009’s and 2020’s stimulus packages.

Exhibit 1: 2009 American Recovery and Reinvestment Act Compared to 2020 CARES Act



Sources:  The Wall Street Journal, “Obama Signs Stimulus Into Law ,” 18 Feb 2009; “Senate Approves Roughly $2 Trillion in Coronavirus Relief ,” 26 Mar 2020.


Japan’s package focuses heavily on households whose incomes have dropped significantly, as well as small businesses affected by COVID-19. It also looks forward to the time when restrictions will be lifted, including plans to stimulate travel and consumer spending. When and to what extent those provisions can actually be deployed remains to be seen.

The EU, in the meantime, faces the additional challenge of being amid negotiations over its multiannual financial framework (MFF)—the seven-year budget which it must agree upon before the end of 2021. As has been the case historically, the camps divide along roughly regional lines—with the generally economically better-off northern countries (the Netherlands, Sweden, Denmark, Austria, Germany) pitted against the generally poorer southern and eastern countries (Italy, Greece, Poland, Hungary). MFF negotiations were shaping up to be something of a bruising affair well before COVID-19 entered our global lexicon—complicated by Brexit, which has meant a €60bn gap (the UK’s prior contributions) in the EU’s typical budget. 

Enter COVID-19 and the EU’s attendant desire to pass some form of fiscal stimulus and/or support that will help patch the bloc’s economies while many countries are in some degree of lockdown. Talk of coronabonds, though, has resurfaced old tensions from the European sovereign debt crisis, which also tended to put at loggerheads struggling countries (like Italy, Spain, Portugal and Ireland) with their financially sounder brethren, who were keen to extract economic reforms in exchange for various degrees of economic and financial backstops. Given the intricacies of EU negotiations, it’s anyone’s guess how this particular round will turn out.

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