THE STATE OF THE EUROPEAN UNION REPORT. Europe in a period of transition

THE STATE OF THE EUROPEAN UNION 62 sion’s estimates, that measures with fiscal impact will amount to 2.6 per cent of GDP in 2021, and around 0.6 per cent of GDP in 2022. For the period 2020-2022, measures with a direct impact on expenditure will total 11 per cent of GDP, excluding those measures taken at the European level. It is important to note that, since the start of the pandemic, total purchases of sovereign bonds under the Asset Purchase Programme (APP) and the Pandem- ic Emergency Purchase Programme (PEPP) by the ECB during 2020 amounted to 0.9 trillion euros (De Grauwe, 2021).After its monetary policy meeting on 22 July 2021, the ECB confirmed the continuation of its asset purchase programme, establishing a monthly purchase rate for the APP of 20 billion euros, and the purchase of sovereign bonds through PEPP, at a monthly rate that rose from 53 billion euros in January 2021 to 80 billion in June 2021 (ECB, 2021).As a result, until March 2022 at the earliest, the majority of the national fiscal stimulus will continue to be funded at the European level. Including the European measures, the fiscal effort with a direct budgetary impact is estimated at around 15 per cent of GDP. It is important to note that this figure may be an overestimate as there could be double count- ing of projects that were originally to be funded national- ly and which are now included in national recovery plans. Although President Von der Leyen stated that, taken together, European Union financial and fiscal support for 2020, 2021 and 2022 is equivalent to 18 per cent of GDP, this analysis concludes that the combined fiscal effort of Member states and the European Union, solely counting measures with a direct impact, represents 15 per cent of GDP. This is a significant sum but it is a more modest amount than the one announced by the Pres- ident. However, it captures Europe’s fiscal effort more accurately by excluding liquidity support measures, the true impact of which is difficult to estimate. Calculating liquidity support measures and spending together, the total fiscal effort of the European Union is estimated at 10.6 per cent of GDP, a figure that is consistent with the sum estimated in previous analyses (Ruiz Devesa and Pérez Monclús, 2020). The fiscal response in the United States The Trump administration’s initial response to the pan- demic was the Coronavirus Preparedness and Respon- se Supplemental Appropriations Act on 4 March 2020, consisting primarily of measures with an immediate bud- getary impact. This act transferred 8.3 billion dollars in emergency funds for public health agencies and research into covid-19 vaccines. It also allocated 7.8 billion dollars to federal, state and local health agencies, and authorised 500 million dollars of spending through Medicare, the fe- deral health insurance system.This stimulus was followed on 18 March 2020 by the Families First Coronavirus Res- ponse Act , funded to the tune of 192 billion dollars. The act increased federal spending on Medicaid, a programme that provides health coverage to people on low incomes, and on food security, and provided enhanced unemploy- ment pay. It also required some employers to provide paid sick leave and expanded tax credits for those employers to compensate the cost, among other measures. Table 2: Fiscal measures of Member states in response to the covid-19 pandemic (% of GDP) 2020- 2022 “Above the line” measures Liquidity support Additional spending or income not received Accelerated spending / deferred revenue Subtotal “Below the line” measures Contingent liabilities: Guarantees Subtotal Health sector Non-health sectors 11 1.1 9.0 0.8 19.0 4.8 14.2 Source: based on data from CE, 2021.