SPEU - Eurozone: How Accommodative Will Fiscal Policy Get?

• The pandemic led to unprecedented government support schemes and a rethinking of government investment. Now, the war in Ukraine has led to a broad rethinking of European defence spending and yet another push for an even faster green transition and energy independence.
• Also, we expect more government support schemes in the coming weeks and months to offset the adverse effects from high energy prices for consumers but also corporates.
• In the short run, policy will probably not be accommodative enough to avoid a marked slowdown or even recession. In the long run, it is likely to remain more expansionary, resulting in tough choices on burden sharing, spending rules or fiscal adjustment.

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