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The economic recovery plans

Author

Listed:
  • D. Dury

    (National Bank of Belgium, Research Department)

  • G. Langenus

    (National Bank of Belgium, Research Department)

  • K. Van Cauter

    (National Bank of Belgium, Research Department)

  • L. Van Meensel

    (National Bank of Belgium, Research Department)

Abstract

Economic recovery plans make up a important part of the wide-ranging package of measures that economic policy-makers worldwide have taken in response to the financial and economic crisis. More specifically, the EU Member States have either approved or announced fiscal measures to boost economic growth amounting to a total of 1.1 p.c. of GDP in 2009 and 0.7 p.c. of GDP in 2010 for the EU as a whole. In the United States, the cumulative budgetary cost of the recovery measures over 2009 and 2010 should reach 5.4 p.c. of GDP. However, fiscal support for economic activity through the automatic stabilisers is greater in the EU than in the US. A comparison of policy responses, as regards both the scope and composition of the recovery plans, shows that there are significant divergences amongst the EU Member States themselves. Differences in terms of the extent of the recovery plans are in accordance with the European economic recovery plan’s call for account to be taken of differences in initial budgetary positions when drafting the national plans. Moreover, the European recovery plans consist of a wide range of measures, which, on the whole, are quite evenly distributed over the revenue and expenditure sides of the equation. The growth-supporting measures may be able to ease the recession in the short term, but the impact they will have is uncertain and possibly even fairly limited. An optimum effect of the recovery plans on economic growth in the short term would only really be reached if a number of preconditions are met first. So it is clear that the growth-stimulating measures need to be timely, temporary and targeted, conditions that are not always met. Furthermore, the effectiveness of the measures taken is to a large extent determined by the reactions from private economic agents. In this respect, an essential precondition is for there to be no doubt about the sustainability of government finances over the long run. However, combined with the already weak budget positions that some countries had to start with, the economic recovery plans and the effect that the recession has on the budget situation via the relatively large automatic stabilisers have seriously affected the state of public finances in many countries.

Suggested Citation

  • D. Dury & G. Langenus & K. Van Cauter & L. Van Meensel, 2009. "The economic recovery plans," Economic Review, National Bank of Belgium, issue iii, pages 59-73, September.
    • Handle: RePEc:nbb:ecrart:y:2009:m:september:i:iii:p:59-73
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    File URL: https://www.nbb.be/en/articles/economic-recovery-plans-1
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    References listed on IDEAS

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    1. Werner Roeger & Jan in 't Veld, 2009. "Fiscal policy with credit constrained households," European Economy - Economic Papers 2008 - 2015 357, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
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    Cited by:

    1. M. Nautet & L. Van Meensel, 2011. "Economic impact of the public debt," Economic Review, National Bank of Belgium, issue ii, pages 7-19, September.

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    More about this item

    Keywords

    fiscal stimulus; financial and economic crisis; EERP (European Economic Recovery Plan;
    All these keywords.

    JEL classification:

    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • E66 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General Outlook and Conditions

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