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Germany and Austria use European Recovery Fund Mainly to Replace National Spending

Germany and Austria are using the EU’s Recovery and Resilience Facility primarily to finance existing or planned projects rather than to invest in new projects. This is the central finding of a new study by the research network EconPol Europe. “This suggests that the EU funds are mainly used to replace national spending that governments would have made anyway,” says Mathias Dolls, scientific coordinator of EconPol and co-author of the study.

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Fiscal Policy Measures Saved at Least 200,000 Jobs during the Covid-19 Crisis in Austria

Fiscal policy measures aimed at mitigating the economic impact of the Covid-19 lockdown measures in Austria led to higher employment by about 200,000 persons in 2020 and by about 41,000 persons in 2021. This is a key result of a large-scale macroeconomic simulation study carried out by EconPol Europe. Out of the 200,000 persons who remained in employment in 2020 thanks to fiscal measures, 191,000 can be attributed to short-time work schemes alone. “Short-time work schemes were particularly successful in preventing employment from plummeting in line with real activity.

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Politicians Often Postpone Tax Increases to Directly after Elections

Tax increases in industrialized countries are often implemented directly after elections. This is a finding of a new study by the research network EconPol Europe. “Our findings show that politicians seem to postpone tax rate increases to the year after elections. We saw increases mainly in value added and sales tax (VAT) rates after elections – in other words, taxes that the majority of voters feel directly in their wallets,” says Niklas Potrafke, co-author of the study.

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Italy’s Minimum Wage Should Be EUR 8.25–9.65 per Hour

The optimal minimum wage for Italy should range between EUR 8.25 and 9.65 per hour. This is one of the main conclusions of a new study by the research network EconPol Europe based on data from 2018. This amount corresponds to around 63 to 73 percent of the median wage in the observed sample of Italian firms. “We also show that the calculated value of the optimal minimum wage has remained relatively stable between 2011 and 2018,” says Mauro Caselli, one of the co-authors of the study.

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EconPol Europe: Policymakers Should Consider High Public Debt Ratios as a Risk

High public debt ratios resulting from the Covid-19 crisis should be considered a potential source of problems, even in an environment of low interest rates. This is the key conclusion of a policy paper by Daniel Gros (EconPol, CEPS), which will be presented at EconPol’s annual conference. “A key but often overlooked legacy of the Covid-19 crisis is increased uncertainty,” Gros explains. In his paper, he points out that what makes increased uncertainty more important is that the cost of public debt goes up more than linearly with higher debt ratios.

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