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1. COVID-19 credit-support programmes in Europe’s five largest economies

Author:
Julia Anderson, Francesco Papadia, and Nicolas Véron
Publication Date:
02-2021
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
In 2020, European governments mitigated the economic impact of COVID-19 lockdowns and other pandemic-fighting programmes through a host of initiatives. These included efforts to support credit, such as guarantees for bank loans, particularly to small- and medium-sized enterprises (SMEs). We present and analyse detailed information about those national credit-support programmes implemented in the context of fiscal policy, in Europe’s five largest national economies (besides Russia) in 2020: France, Germany, Italy, Spain and the UK. The information was collected through thorough examination of published material and extended exchanges with national authorities and financial sector participants. The analytical part of the paper focuses on two aspects: How countries have dealt with the many trade-offs that emerged in designing and implementing the programmes; What explains the differentiated usage of the facilities in the examined countries, as well as its levelling off in the second half of 2020. Section 1 defines and describes the programmes. Section 2 presents the trade-offs we identified in programme design and implementation. Section 3 explores the factors explaining actual usage in the five countries and over time. Section 4 concludes. Annexes provide details on the programmes for each country (Annex 5) and in summarised matrix form (Annex 4).
Topic:
Business, Fiscal Policy, COVID-19, and Credit
Political Geography:
United Kingdom, France, Germany, Spain, and Italy

2. COVID-19 financial aid and productivity: has support been well spent?

Author:
Carlo Altomonte, Lionel Fontagné, Maria Demertzis, and Steffen Müller
Publication Date:
11-2021
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
Most European Union countries have made good progress with vaccinating their populations against COVID-19 and are now seeing a rebound in economic activity. While the scarring effects of the crisis and the long-term implications of the pandemic are only partially understood, the effects of support given to firms can be evaluated in order to help plan the removal of crisis support. European regions and countries that depend heavily on services requiring physical proximity have been hit hardest by COVID-19-related measures. But these services sectors tend also to be the smallest and least-productive in any economy, implying that, coming into the crisis, the highest shares of zombie firms were in these sectors. Reliance on physical proximity and the higher incidence of zombies to start with have combined to make those services-dependent economies particularly vulnerable to any attempt to remove the support put in place during the pandemic. The evidence shows that the main goal of the provision of support during the COVID-19 crisis, namely to protect employment, has been achieved. However, the evidence is varied on how efficiently this was done, in terms of helping firms that have a good chance of surviving, while not supporting those that will in any case exit. An analysis of France, Germany and Italy shows the potential for ‘cleansing effects’ in that it was the least-productive firms that have been affected most by the crisis. While support was generally not targeted at protecting good firms only, financial support went by and large to those with the capacity to survive and succeed. Labour schemes have been effective in protecting employment.
Topic:
European Union, COVID-19, and Financial Aid
Political Geography:
Europe, France, Germany, and Italy