FISCAL RESPONSE IN COVID-19 CRISIS – CASE OF THE EUROZONE

Aim: The paper makes two important contributions to the fiscal policy literature during the COVID-19 pandemic, analyzing the way Eurozone countries responded with fiscal expansion or restriction as a means to manage the pandemic crisis. This research investigates the national governments’ fiscal policies introduced to manage the COVID-19 pandemic within economic, political and institutional contexts, focusing on European countries that are part of the Eurozone. It demonstrates similarities and heterogeneity in three dimensions of fiscal policy responses to COVID-19 (the size of fiscal spending, the type and targets of fiscal policy responses) across 19 Eurozone countries, in the period effective from the pandemic until January 2022. Methods: A Cross-Country Analysis and Statistical Analysis in 19 Eurozone Countries was applied. Results: Eurozone countries with strong economies (Germany, France) implemented fiscal expansion directly to cope with the pandemic while weaker economies (Estonia, Spain) responded late. Additionally, the business sector was supported first, instead of the health sector, by governments. Conclusions: The paper makes two important contributions to the fiscal policy literature during the COVID-19 pandemic. The original contribution of this research is that it is one of the first comparative analysis studies to focus on the European region regarding national fiscal policy responses to the COVID-19 pandemic. Existing studies on COVID-19 policy responses have primarily focused on public health measures.