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The high levels of public debt that have been building up since 2020 and the need to lower this burden have prompted a debate on fiscal rules relating to national accounts, aside from the matter of Europe approving common financing instruments to address the big strategic challenges that lie ahead.
The election results show a very open electoral landscape—with a narrow victory by the SPD. These elections are important because they signal the start of an electoral cycle in the major European countries, within a context plagued with problems needing to be resolved.
The pandemic has led to several historical comparisons, such as the 1918 influenza and the Roaring Twenties that followed. Another clear comparison is the massive Next Generation EU (NGEU) fiscal stimulus set to be launched in Europe, which resembles the Marshall Plan passed following World War II, but for the modern age.
We are faced with a pandemic whose economic impact will likely cause the biggest drop in global GDP since the end of the Second World War. The uncertainties are enormous.
The trigger leading to the sharp market reaction was on the one hand the manifesto of the coalition between the Five Star Movement (M5S) and the League, which included disproportionate fiscal expansion. All Italian parties had made extravagant fiscal promises, but had not envisaged sticking to them when forming a government.