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

THE STATE OF THE EUROPEAN UNION 84 backed the public spending drive.The fiscal framework of coordination was relaxed – activating the general escape clause in the Stability and Growth Pact –, as was the State Aid Temporary Framework. In addition, community resources were mobilised with the creation of a new ESM credit line, a fund to mobilise loans to SMEs in the frame- work of the EIB, or the creation of the SURE to guarantee assistance to workers on job retention schemes. Yet perhaps what proved most crucial was the sup- port of the European Central Bank – basically through the Pandemic Emergency Purchase Programme and the Eurosystem’s financing and liquidity injection operations – as they would smooth the way to the community mem- bers’ fiscal drive by relaxing financing conditions and guaranteeing the availability of sufficient liquidity, thus ultimately averting the dreaded financial fragmentation of the Eurozone. All that allowed the Member States to deploy a broad range of discretionary measures that appeared to be sim- ilar, but which were conditioned by the different fiscal capabilities of each member, and despite the community flexibility and support.The Member States with more solid fiscal positions, such as Germany or Austria, were able to provide direct assistance to a greater degree than other Germany Greece Austria Latvia France Poland Belgium Italy Malta Cyprus Czech Rep. Ireland Slovenia Portugal Lithuania Netherlands Sweden Luxembourg Spain Hungary EU Slovakia Estonia Finland Croatia Romania Denmark 0,0 5,0 10,0 15,0 20,0 25,0 30,0 35,0 40,0 45,0 Discretionary measures with budgetary impact Liquidity measures Source: IMF Fiscal Monitor: Database of Country Fiscal Measures in Response to the COVID-19 Pandemic. Figure 2. Response to the crisis in the EU Member States (% of GDP)