Arnoud Boot, Elena Carletti, Hans‐Helmut Kotz, Jan Pieter Krahnen, Loriana Pelizzon, Marti Subrahmanyam In the early stages of the Covid-19 crisis, concerns emerged over potential divergence in the euro area (e.g. Boot et al. 2020). These concerns were valid given the unprecedented scale and asymmetric impact of the shock. These concerns were also aggravated by the initial situation of the euro area, with potentially destabilising imbalances between ‘core’ and ‘periphery’ countries. Calls for coordinated responses – in particular on the fiscal front – appeared quickly (Baldwin and Weder di Mauro 2020). The ECB acted fast in order to provide fiscal space (Bartsch et al. 2020a) by keeping borrowing costs low and by effectively providing a monetary backstop to government debt. The same authors also noted that “correcting current imbalances between investment and saving, could set in a virtuous circle of stronger growth and reduced indebtedness” (Bartsch et al. 2020b). The fiscal response at the national level was strong all over Europe, and the unprecedented fiscal package adopted by the European Council this summer – Next Generation EU – is an important step towards addressing potential divergence in the euro area.