EU Economic Policy Under the Pandemic Crisis: Key Dimensions for a Sustainable and Resilient Recovery - Trans ...
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EU Economic Policy Under the Pandemic Crisis:
Key Dimensions for a Sustainable and Resilient
Recovery
Nuno Gama de Oliveira Pinto*
shock was far more severe than initially
anticipated.
Abstract
Given the unprecedented scale and multi-
The COVID-19 pandemic constitutes an faceted nature of the COVID-19 crisis,
unprecedented challenge with very severe comparisons with previous ones, including the
socio-economic consequences. The 2008-2009 financial crisis, have significant
magnitude of the response must match the limitations. The second pandemic has thrust
scale of the crisis, prevented a more Europe back into economic crisis.
devastating outcome. Risks remain The COVID-19 recession is singular in many
significant and are rising as a second wave respects and is likely to be the deepest one in
of infections is intensifying. The recovery advanced economies since the Second World
from this crisis will be uneven and partial. War and the first output contraction in
Given the considerable uncertainty, policies emerging and developing economies in at
must stay resolutely supportive to sustain least the past six decades.
the recovery.
The pandemic highlights the urgent need for
health and economic policy action, including
Introduction global cooperation, to cushion its
consequences, protect vulnerable
populations, and strengthen countries’
In the space of just a few months, the COVID-
capacities to prevent and deal with similar
19 pandemic swept across the world
events in the future.
restricting the movement of millions of
people, impacting lives and jobs, disrupting A resilient and balanced recovery of Europe
international supply chains, and bringing will remain critical for the world to return to
global economies to a halt. The economic the trajectory of sustainable development.
Europe plays a pivotal role in fostering global
* Nuno Gama de Oliveira Pinto is a University Professor and Senior Researcher (Center for International Studies – CEI-IUL; Portuguese
Institute of International Relations – IPRI). All the opinions expressed in this briefing are the sole view of the author, and do not represent
the position of the Portuguese Institute of International Relations nor of the Trans European Policy Studies Association (TEPSA).
Economic Policy Under the Pandemic Crisis:
TEPSA Briefs – January 2021 Key Dimensions for a Sustainable and
Resilient Recovery
growth and development. Europe accounts financial markets using its high credit rating,
for 33 % of global imports and nearly 60 % of which should secure low borrowing costs.
bilateral and multilateral development
assistance. A severe recession in Europe will The Commission’s plan envisaged that EUR
reverberate throughout the rest of the world, 500 billion would be distributed in grants,
undermining sustainable development efforts however EU leaders cut the level of grants to
not only in Europe but also in Africa, Latin EUR 390 billion (and reduced the proposed
America and South Asia. budget to EUR 1.074 trillion) at their summit
on 17-21 July 2020. The funds will be used to
A Deeper Recession reach the EU’s objectives of climate neutrality
and digital transformation, to offer social and
In July 2020 the President of the European employment support as well as to reinforce
Commission, Ursula von der Leyen, delivered the EU’s role as a global player.
a speech in the European Parliament (EP)
plenary at the debate on the presentation of
the programme of the German Presidency of The EU economy will experience a deep and
the Council of the European Union (EU). longer recession due to the coronavirus pandemic,
Emphasizing the unprecedented situation despite the preventative response and efforts
Europe is currently facing, she said: “We have made at both EU and national levels.
entered the worst recession since the Great
Depression. This crisis is deeper and broader
than the one ten years ago”.
With the launch of the European Green Deal
The EU economy will experience a deep and in December 2019, the EU made a bold
longer recession due to the coronavirus statement to become the global leader in
pandemic, despite the preventative response green technologies and economic
and efforts made at both EU and national sustainability. The European Green Deal is
levels: now the growth strategy of Europe. The
investments supported by the EU recovery
package and budget will be fully in line with
its objectives to have a climate-neutral
economy. In the near term, however, the
COVID-19induced economic contraction may
depress Europe’s efforts to promote green
growth and reduce carbon footprints.
The Commission’s Autumn Forecast projects
that the EU economy will contract by 7.4% in
2020 before recovering with growth of 4.1%
in 2021 and 3% in 2022. The euro area
Figure 1 - Economic Forecast Figures (Source: European economy will contract by 7.8% in 2020 before
Commission) growing 4.2% in 2021 and 3% in 2022. It’s now
expected to take at least two years for the
On 27 May 2020, the European Commission European economy to come close to its pre-
presented in the EP a EUR 750 billion pandemic level.
economic stimulus plan that, along with a
revised proposal for the EU's 2021-2027 On The Road To Recovery?
budget, should help mitigate the shock from
the coronavirus pandemic. Germany, Portugal, and Slovenia are holding
Under the proposal, the European the Presidency of the European Council in
Commission would borrow the money on the succession from July 1, 2020, through to
December 31, 2021.
Economic Policy Under the Pandemic Crisis:
TEPSA Briefs – January 2021 Key Dimensions for a Sustainable and
Resilient Recovery
A Trio Council Presidency was officially special emphasis on small and
introduced in 2007/2008, after the signing of medium-sized enterprises. At the
the Lisbon Treaty, when Germany, Portugal same time, there will be a further
and Slovenia also worked together as the first deepening of Economic and Monetary
trio. As early as 1981 Council Presidency Union;
countries began forming informal groups of • The European Green Deal will be
three to ensure the greatest possible supported with investments in all
continuity. The following is a brief outline of regions to create a climate-neutral
the most important topics in the joint and green Europe. In the field of
German, Portuguese and Slovenian foreign policy, European values will be
programme for the period until the end of promoted further on an international
2021: level, the enlargement process
towards the Western Balkans will be
• Efforts will centre on promoting
continued and cooperation with
cooperation and consensus about Africa strengthened;
overcoming the coronavirus • European defence policy will be
pandemic. This includes combating another focus area. Following the
COVID-19, strengthening the Maastricht Treaty, which established
necessary structures to be better able the Common Foreign and Security
to respond to crises of this kind in the Policy in 1993, the Franco-British
future, and promoting a recovery of Summit in Saint-Malo laid the
the community from the economic foundations for a European defence
effects of the crisis;
and security policy in 1998. The
• The Multiannual Financial Framework European Security and Defence Policy
of the Union for 2021-2027 will also was created the following year with a
be adjusted to meet these view to developing the European
requirements. The countries Union’s role in managing international
undertake to maintain a fair and crises through humanitarian,
social Europe while simultaneously evacuation, peacekeeping and
promoting European interests and intervention tasks (also known as
values worldwide. These include Petersberg tasks). The overarching
human rights, equality and corporate
priorities have already been defined
social responsibility;
in the EU Global Strategy. EU member
• The digital transformation of Europe states now aim to specify how these
will be fostered in a way that respects priorities can be implemented and
human rights and protects citizens. will jointly decide which capabilities
Specifically named areas for digital the EU should – and should not –
progress are education, research, provide with respect to crisis
finance and health; management, enabling and enhancing
• The trio programme aims to develop partners and protecting the Union
permanent and crisis-proof solutions and its citizens. At the same time, the
in the area of migration. At the same Strategic Compass as the new security
time, measures against illegal policy document must be based on a
migration and human trafficking are
broad political consensus and a strong
to be strengthened and action taken political will to act.
against the causes of migration and
displacement. With regard to Portugal’s Presidency of the EU from January
economic policy, the focus will be on to June 2021 comes at a crucial time. Under
further promoting a fair European the motto “Together for a stronger, more
Single Market; equitable and more sustainable Europe”,
• The industrial competitiveness of the Portugal takes over its fourth Presidency of
Union will be strengthened with the Council of the European Union, afterEconomic Policy Under the Pandemic Crisis:
TEPSA Briefs – January 2021 Key Dimensions for a Sustainable and
Resilient Recovery
those of 1992, 2000 and 2007, in which it made more robust so that they can deal
concluded important European agreements better with worker dislocation and retraining
and helped open Europe to Africa. The needs arising from automation and
priorities of the fourth Portuguese Presidency technological change.
will be:
The COVID-19 pandemic, lockdown measures,
• To promote Europe's recovery, and ensuing economic recession had a
leveraged by the climate and digital disproportionate impact on people living on
transitions; low incomes or in poverty. The EU eased rules
• To implement the Social Pillar of the to make funds available to member states to
European Union as a key element for mitigate the effects, but unemployment, food
ensuring a fair and inclusive climate insecurity, and unequal access to distance
and digital transition; learning exacerbated existing inequalities.
• To strengthen Europe’s strategic
autonomy keeping it open to the It will be critical for countries not to withdraw
world. support prematurely, and importantly, to
continue to target the measures in a way that
helps the most vulnerable.
With the Environment, Digital Transition, the
Social Dimension, Resilience and Global For these reasons, it has been maintained that
Europe as major themes, the focus of the economic and monetary union will make it
Portuguese Presidency will be Social Europe more necessary to strengthen economic and
and, externally, the EU-India Summit and, as a social cohesion policies and in particular will
key topic, the relationship between the EU create the need for substantial increases in
and Africa. the EU budgetary resources to be channeled
into these policies.
Conclusion History shows that countries that invest in the
recovery, rather than tightening too much too
Europe is facing an unprecedented crisis and fast, not only enjoy a faster recovery, but are
EU leaders must address the serious dangers also able to reduce debt faster. A deep
of the economic recession. The COVID-19 recession, for example, will depress Europe’s
pandemic has created a health and economic demand for goods and services from the rest
crisis without modern parallel. The road to of the world, putting at risk millions of export
recovery is long and winding. To deal with the sector jobs in developing countries that rely
crisis satisfactorily, the criteria of the recent heavily on sending their products to the
past hardly apply. European market. During the global financial
The scale of this unprecedented economic crisis in 2009, imports of the 28 EU members
shock, the enormous uncertainty it entails and fell by 11 %, which depressed exports and
the persistence of the pandemic stand in the growth of many developing countries.
way of a complete and rapid recovery. The A speedy, resilient and balanced recovery of
European Action Plan for the Social Economy, Europe from the crisis will be critical not only
that the European Commission has for maintaining European solidarity, but also
announced for 2021, constitutes a unique for ensuring that the continent can quickly
opportunity to put social economy at the resume its pivotal role in global trade, official
heart of the efforts to restore sustainable development assistance, foreign direct
growth and social cohesion in Europe. investment and remittances, and the world
This is also the time to design reforms that returns to the trajectory of sustainable
boost productivity growth and policies that development.
help transform the economy, to reap the
benefits of digitalization and mitigate climate
change. Social systems can be improved andEconomic Policy Under the Pandemic Crisis:
TEPSA Briefs – January 2021 Key Dimensions for a Sustainable and
Resilient Recovery
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TEPSA Briefs – January 2021 Key Dimensions for a Sustainable and
Resilient Recovery
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