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Published: 2022
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ISBN-13: 9789286151965
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Less than two years after the pandemic hit Europe, EU real gross domestic product (GDP) is back to precrisis levels, with the third quarter of 2021 marking a return to the level seen in the fourth quarter of 2019. Thanks to a rapid, large-scale and comprehensive policy response, the crisis seems to have left fewer scars than originally feared. At the microeconomic level, policy intervention prevented major disruption, but the resilience of firms and jobs to a full phasing out of support has yet to be tested, and further scarring may yet become apparent. At the macroeconomic level, uncertainty remains about the effect of new waves of the pandemic and the eventual phasing out of emergency economic measures across Europe, as well as the design of the new policy normal. Looking forward, the risk of a recovery that is asymmetric for individuals, firms and countries remains. Meanwhile, the challenges of the climate transition and digitalisation have become more urgent than ever, and the recovery offers an opportunity to address them. This report looks back at the impact of the pandemic on individuals, firms and countries within the European Union. It also looks forward, at how to use the recovery as a springboard for transformation. Keeping an eye on investment, it looks at the effectiveness of policy support and assesses evidence of post-pandemic scars. It examines how European firms are using the pandemic and the recovery as an opportunity to prepare themselves for a changing world. It also discusses the role of public support in ensuring a just recovery, preventing rising inequalities. While the swift policy action implemented so far prevented an economic depression, the recovery requires further coordinated efforts across Member States. To prevent an asymmetric recovery and raise long-term growth prospects, the following priorities are key: Maintain the momentum on high-quality public investment, assuring the implementation and maximum impact of the Recovery and Resilience Facility, while avoiding abrupt fiscal adjustments that may hinder the recovery. Catalyse private investment through risk-sharing instruments to mitigate ongoing macroeconomic uncertainty, including a shift from generalised support for firms to targeted incentives for transformation, particularly for digitalisation and the climate transition. Create the conditions for an acceleration of the digital transformation of the EU economy, with supportive infrastructure, information security and data governance, an acceleration of digitalisation in the public sector and an intensified focus on training and skills. Reinforce climate policy guidance and implement regulatory proposals to close the remaining gaps in the European Union's decarbonisation strategy, including plans for the energy transition and the further integration of the EU energy markets, and provide the right incentives to capitalise on EU leadership in climate-related innovation.
