There is no single path to a resilient economy, but some common themes emerge. A key role taken by public authorities in the aftermath of an economic shock is to stabilize the situation, both through its own actions and through helping to reduce the uncertainties facing households and firms. A second dimension of public policy is to promote economic recovery through helping firms and households to adapt to new circumstances. However, an economic shock affects government finances, alternative policy approaches may be required.
Typical policy responses to promote recovery can include:
- Economic stimulus packages
- Employment support
- Promoting flexible working
- Supporting training
- Promoting entrepreneurship, competitiveness and innovation
- Encouraging economic diversification
- Tax and investment incentives
- Easing eligibility rules and providing access to credit
- Government reform and institutional change
- Leadership and dialogue
- Supporting community responses
- External support
New policy responses take time to design, develop and implement. This leads many authorities to seek to adapt existing regulations and initiatives to respond to economic shocks. Four types of approach can be identified:
- Introduction of new provisions – often in response to the particular dimensions of the crisis, occasionally on a precautionary basis. The advantage is that these are particular to the circumstance, but their introduction takes time and its implementation is unfamiliar.
- Amendment of existing instruments – such as in Germany where long-standing provisions for Temporary Short-Term Working Allowances were amended to ease eligibility, extend the payment period and increase the allowance available. The advantage is that the instrument is familiar to all parties and can be introduced relatively swiftly.
- Repurposing of existing initiatives – whereby funds earmarked for one group are diverted to a new priority, such as in Estonia where resources under the Unemployment Insurance Fund were diverted from training and follow-up schooling to support enterprises avoid labour cuts.
- Activation of special measures – where additional resources and policies can be mobilized through the identification of a crisis situation. Often used to respond to disaster and emergency situations there is limited evidence of authorities making use of such tools to tackle the shock of the economic crisis.