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

THE FISCAL EFFORT TO COMBAT COVID-19: EUROPE AND THE UNITED STATES 63 This was followed on 27 March by the CARES Act, a support package worth some 2.2 trillion dollars, to combat the short-term economic impact of the pandemic. This focused on “below the line” measures, supporting liquidity with loans and guarantees. Of particular note were financial support to large corporations and public bodies of up to 500 billion dollars, of which 450 billion were allocated to loans to companies, states and munic- ipalities through a new Federal Reserve loan mechanism. It also provided 380 billion dollars worth of econom- ic support for small businesses, channelled primarily through the Paycheck Protection Program (PPP) offering 349 billion dollars of loan guarantees. Designed to pre- vent layoffs, the guarantee programme supported loans spent on payroll costs, rent and utilities. Direct spending was also strengthened, with an ad- ditional 270 billion dollars allocated to unemployment cover, increasing both the duration and value of cover (up to 600 dollars a week), and expanding the eligibility requirements to include more categories of worker. And federal support to hospitals and healthcare providers was increased with the provision of 150 billion dollars, in addition to other tax incentives. One of the specific char- acteristics of the US intervention in comparison with the actions prioritised in Europe was the introduction of di- rect payments to taxpayers in the CARES Act, with a total value of 290 billion dollars.These cheques of up to 1,200 dollars for individuals with incomes below 75,000 dollars (or 150,000 dollars for families) and of 500 dollars per child, depending on circumstances, offered immediate protection to vulnerable families and stimulated demand, particularly in the short term. Moreover, on 24 April 2020 legislators approved the Paycheck Protection Program and Healthcare Enhance- ment Act, with funding of 484 billion dollars. This pro- gramme consolidated the CARES Act, with an additional 383 billion to support small companies (321 billion for the PPP, 60 billion for emergency loans) and provided an additional 75 billion dollars to funding programmes for hospitals and 25 billion for covid-19 testing. The final Act signed by Trump, the Consolidated Appropriations Act 2021, was issued on 27 December 2020, and provided a further 868 billion dollars of federal support. Support to small companies (302 billion dollars) through the PPP was a central element of the latest stim- ulus, and this measure was accompanied by an increase in unemployment provisions (119 billion dollars). At the same time, direct payments to individuals and families were strengthened, and support was channelled towards specific health measures (78 billion dollars).The package strengthened the education sector, and included other social measures, such as increasing spending on food stamps, childcare, rent and transport. On 11 March 2021, President Biden enacted the America Rescue Plan, worth 1.8 trillion dollars (ap- proximately 8.8 per cent of GDP in 2020). The plan, Table 3: Fiscal measures at the national and European level 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 Member states 11 1.1 9.0 0.8 19 4.8 14.2 European Union 3.8 0 3.8 0 6.8 6.2 0.6 Total 15 1 13 1 26 11 15 Source: based on data from IMF, 2021, and CE, 2021.