Nick Kounis, head of financial markets research at ABN AMRO, points out that the latest Autumn economic outlook for the European economies published by the European Commission suggests that its projection for the change in the fiscal stance for the Eurozone as a whole for 2020 suggests that easing will be very modest.
“The structural budget balance (which removes the impact of the cycle, interest payments and one-offs) deteriorates by just 0.2% GDP for the eurozone as a whole in 2020. Looking at the individual member states, this is driven by moderate fiscal easing in Germany (0.4% GDP), the Netherlands (0.5%) Italy and Belgium (both 0.3%). Meanwhile, the fiscal stance is expected to be more or less neutral in Spain, France and Austria.”
“One important caveat on these numbers is that they assume no policy changes and not all member states have finalised policy plans for next year. However, the picture is generally consistent with the indications from governments, which suggest that there is currently no appetite for large scale fiscal stimulus in member states that have the space, while others are constrained by the EU’s fiscal rules.”
“The European Commission called for countries with fiscal space to use it. It noted that it would not only help to cushion the slowdown but that modernising the public capital stock could boost potential growth. Meanwhile, it called for member states with high public debt to enact ‘prudent policies to put their debt credibly on a sustainable downward path’.”
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