News & Analysis

Although the European Central Bank’s response to the pandemic and the global financial crisis are largely similar, with liquidity injections made to stabilise interbank markets, swap lines established with other central banks to combat short-term funding pressures, and crisis credit measures being rolled out, the nature of the shock and the policy response means comparisons largely stop there. The ECB is more constrained this time around with rates already in negative territory, meaning most stimulus provided came in non-standard policy measures. Additionally, the EU drew lessons from the decade-long economic recovery from the GFC and applied full flexibility to the fiscal rules this time around while also launching a recovery fund consisting of grants and loans to provide continued support to the hardest-hit countries. In this analysis piece, we dive into the policy differences between the two crises and take a look at the composition of the recovery fund.

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