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. 2021 Aug 5;56(4):211–219. doi: 10.1007/s10272-021-0983-8

The Great COVID-19 Divergence: Managing a Sustainable and Equitable Recovery in the EU

Grégory Claeys 1,✉, Zsolt Darvas 1,✉, Maria Demertzis 1,✉, Guntram B Wolff 1,✉
PMCID: PMC8339678  PMID: 34376868

Abstract

The COVID-19 pandemic has led to the biggest global recession since the Second World War. Forecasts show the European Union underperforming economically relative to the United States and China during 2019–2023. Southern European countries have been particularly strongly affected. Some sectors have been hit harder than others. Business insolvencies have, paradoxically, fallen. While total employment has almost recovered, the young and those with low-level qualifications have suffered employment losses. Inequality could rise. The pandemic may lead to lasting changes in the economy, with more teleworking, possibly higher productivity growth and changed consumer behaviour. Policymakers must act to prevent lasting divergence within the EU and scarring due to the fallout from the pandemic. The first priority is tackling the global health emergency. Second, the article warns against premature fiscal tightening but suggests additional short-term support to prevent scarring. Third, the article warns against protectionism and advocates for reforms that boost productivity growth further.

Footnotes

This Paper was prepared for the informal EU Economic and Financial Affairs Council (ECOFIN) meeting in Lisbon on 21–22 May 2021. The authors are grateful to Monika Grzegorczyk, Lionel Guetta-Jeanrenaud, Mia Hoffmann, Klaas Lenaerts, Ben McWilliams, Tom Schraepen and Pauline Weil for excellent research assistance and to Mario Mariniello, Simone Tagliapietra, André Sapir and Nicolas Véron for their useful comments. All remaining errors are our own.

Grégory Claeys, Bruegel, Brussels, Belgium.

Zsolt Darvas, Bruegel, Brussels, Belgium; and Corvinus University of Budapest, Hungary.

Maria Demertzis, Bruegel, Brussels, Belgium.

Guntram B. Wolff, Bruegel, Brussels, Belgium.

Contributor Information

Grégory Claeys, Email: gregory.claeys@bruegel.org.

Zsolt Darvas, Email: zsolt.darvas@uni-corvinus.hu.

Maria Demertzis, Email: maria.demertzis@bruegel.org.

Guntram B. Wolff, Email: guntram.wolff@bruegel.org

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