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International Monetary Fund. European Dept.

investment stimulus package is estimated. The government of Andorra could create over 500 direct jobs—over 1 percent of the labor force bringing the unemployment rate half-way to the pre-crisis level—and additional jobs indirectly depending on how much additional demand is created and the share of skilled/unskilled labor component of the investment projects selected. “Green” investments are often relatively job-intensive and should therefore be at the forefront of the government’s recovery package. 11. Moreover, public investment tends to have larger short

International Monetary Fund. European Dept.
The COVID-19 pandemic has led to severe socio-economic dislocations and hardship. Supported by an unprecedented policy response and by the easing of lockdown measures as the infection rate moderated, the euro area economy initially recovered strongly from the pandemic’s first wave. However, a large second wave and reimposition of containment measures suggest much slower growth momentum in the near term. The outlook is for a subdued economic recovery and low inflation, with a significant permanent output loss relative to the pre-crisis trajectory. Uncertainty remains extremely high, mainly due to different pandemic scenarios, including regarding the availability and effectiveness of potential vaccines and therapies and behavioral changes. Output growth is expected to be much lower through 2021Q1 than projected in 2020 October World Economic Outlook (WEO) but may rebound beyond then in light of recent promising news on vaccine development. The key policy challenge is to continue countering the pandemic while facilitating a robust and inclusive recovery, including by addressing the health crisis, containing economic scarring, supporting resource reallocation and transformation to greener and more digital economies, and limiting the crisis’s impact on inequality and poverty. In a downside scenario, sizable further stimulus would be needed.
International Monetary Fund. European Dept.

dividends and share buybacks to conserve €30 billion of capital in March, the ECB decided to allow the region’s strongest banks to resume dividend payments within strict limits if their capital buffers are sufficient to absorb expected loan losses. 4. EU leaders reached a compromise to finalize the agreement on the EU budget and recovery package on December 11 . The dispute about the rule-of-law mechanism, which threatened to derail approval of the 2021–27 EU budget and Next Generation EU recovery package, was resolved following an agreement to exclusively rely on