MNI BRIEF: NFC Fiscal Aid An EU Sovereign Balance Sheet Risk

National and EU-level fiscal interventions to support non-financial corporations have largely succeeded in insulating the sector from major disruptions, although significant explicit and implicit risks to government balance sheets have built up as a result, a study published in the latest European Central Bank Economic Bulletin concludes.

More targeted approaches will be needed as the pandemic evolves, economists Celestino Girón and Marta Rodríguez Vives argue, though a rush to privatise public corporations should be resisted, and action should be taken to prevent spillovers from non-performing loans undermining banks and reinforcing possible negative sovereign-financial loops.