Rebound interrupted as resurgence of pandemic deepens uncertainty

Outbreak

The coronavirus pandemic represents a very large shock for the global and EU economies, with very severe economic and social consequences. Economic activity in Europe suffered a severe shock in the first half of the year and rebounded strongly in the third quarter as containment measures were gradually lifted. However, the resurgence of the pandemic in recent weeks is resulting in disruptions as national authorities introduce new public health measures to limit its spread. The epidemiological situation means that growth projections over the forecast horizon are subject to an extremely high degree of uncertainty and risks.

An interrupted and incomplete recovery

The Autumn 2020 Economic Forecast projects that the euro area economy will contract by 7.8% in 2020 before growing 4.2% in 2021 and 3% in 2022. The 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. Compared to the Summer 2020 Economic Forecast, growth projections for both the euro area and the EU are slightly higher for 2020 and lower for 2021. Output in both the euro area and the EU is not expected to recover its pre-pandemic level in 2022.

The economic impact of the pandemic has differed widely across the EU and the same is true of recovery prospects. This reflects the spread of the virus, the stringency of public health measures taken to contain it, the sectoral composition of national economies and the strength of national policy responses.

Rise in unemployment contained compared to drop in economic activity

Job losses and the rise in unemployment have put severe strains on the livelihoods of many Europeans. Policy measures taken by Member States, together with initiatives at EU level have helped to cushion the impact of the pandemic on labour markets. The unprecedented scope of measures taken, particularly through short-time work schemes, have allowed the rise in the unemployment rate to remain muted compared to the drop in economic activity. Unemployment is set to continue rising in 2021 as Member States phase out emergency support measures and new people enter the labour market, but should improve in 2022 as the economy continues to recover.

The forecast projects the unemployment rate in the euro area to rise from 7.5% in 2019 to 8.3% in 2020 and 9.4% in 2021, before declining to 8.9% in 2022. The unemployment rate in the EU is forecast to rise from 6.7% in 2019 to 7.7% in 2020 and 8.6% in 2021, before declining to 8.0% in 2022. Continue reading “Rebound interrupted as resurgence of pandemic deepens uncertainty”

Commission sets new plan to support green and digital transition and EU recovery

Innovation

The European Commission adopted yesterday a Communication on a new European Research Area for Research and Innovation. Based on excellence, competitive, open and talent-driven, the new European Research Area will improve Europe’s research and innovation landscape, accelerate the EU’s transition towards climate neutrality and digital leadership,  support its recovery from the societal and economic impact of the coronavirus crisis, and strengthen its resilience against future crises.

The Commission set out strategic objectives and actions to be implemented in close cooperation with the Member States, in order to prioritise investments and reforms in research and innovation, improve access to excellence for researchers across the EU and enable research results to reach the market and the real economy. Additionally, the Communication will further promote researchers’ mobility, skills and career development opportunities within the EU, gender equality, as well as better access to publicly funded peer-reviewed science.

Executive Vice-President for A Europe Fit for the Digital Age, Margrethe Vestager, said: “The EU is already leading innovation through its research and scientific excellence. We want to build on that and step up our efforts towards achieving breakthrough market-driven innovations that will contribute to a green digital Europe and will boost growth, job creation and our competiveness in the global scene. Today we are setting a new ambition for a European Research Area to facilitate cooperation and contribute to a more competitive European industry.

Mariya Gabriel, Commissioner for Innovation, Research, Culture, Education and Youth, said: “We live in times when scientific activities require faster and effective collaborations. We need to strengthen the European Research Area. An area embracing all of Europe, because knowledge has no territorial boundaries, because scientific knowledge grows with collaborations, because knowledge is trusted if there is open scrutiny of its quality. It has also more chances to achieve peaks of excellence and support an innovative and risk taking industry to shape a resilient, green and digital future.”

Launched in 2000, the European Research Area has made major achievements over the past years – yet, today’s context prompts us to rethink how to strengthen its role, better define and implement its key objectives, as well as make it more attractive as a common space for creating valuable research and innovation. Moreover, Europe is currently facing significant societal, ecological and economic challenges that are aggravated by the coronavirus crisis. Research and innovation is therefore crucial in addressing these challenges, delivering on Europe’s recovery and speeding up the twin green and digital transitions. Continue reading “Commission sets new plan to support green and digital transition and EU recovery”

A deep and uneven recession, an uncertain recovery

Recession

The coronavirus pandemic represents a major shock for the global and EU economies, with very severe socio-economic consequences. Despite the swift and comprehensive policy response at both EU and national level, the EU economy will experience a recession of historic proportions this year.

The Spring 2020 Economic Forecast projects that the euro area economy will contract by a record 7¾% in 2020 and grow by 6¼% in 2021. The EU economy is forecast to contract by 7½% in 2020 and grow by around 6% in 2021. Growth projections for the EU and euro area have been revised down by around nine percentage points compared to the Autumn 2019 Economic Forecast.

The shock to the EU economy is symmetric in that the pandemic has hit all Member States, but both the drop in output in 2020 (from -4¼% in Poland to -9¾% in Greece) and the strength of the rebound in 2021 are set to differ markedly. Each Member State’s economic recovery will depend not only on the evolution of the pandemic in that country, but also on the structure of their economies and their capacity to respond with stabilising policies. Given the interdependence of EU economies, the dynamics of the recovery in each Member State will also affect the strength of the recovery of other Member States. Continue reading “A deep and uneven recession, an uncertain recovery”