The EU Economic System under the Pressure of a Pandemic: Opportunities and Limits of Transformation

Abstract

The EU economy is experiencing the third major shock over the last 12 years. First it was the global financial crisis, then the European sovereign debt crisis, and now the COVID-19 pandemic. The economic system of the European Union, that includes national economies and policies and the scope of EU economic policies, takes a severe blow caused by an external factor - the worldwide spread of an extremely contagious virus that threatens people’s lives and health.The article aims at identifying the transformational resource of the EU supranational economic governance in response to a new severe shock.Therefore, two tasks are set. Within the first one, this paper presents an overview of the European economic landscape on the eve of the pandemic, taking into account the long-term trends that emerged after the Great Recession and the euro area debt crisis. Four key features of the “new normal” are highlighted: slow economic growth, fragile labor markets, high levels of government debt and subdued inflation. We study the economic effects of pandemic, or rather, the confinement measures introduced by national governments, on these particular areas.Within the second task this paper evaluates the effectiveness of the key economic responses the EU policy-makers and institutions are taking to counter the impact of the COVID-19 pandemic and to strengthen the resilience of the EU economic system. This approach is translated into the reforms of the EU economic governance under way now with a view of achieving a genuine European and Monetary Union. The paper concludes that with the creation of the single market and the euro the EU has taken almost full advantage of the negative integration. Аnd now to promote growth and employment it has to untap the potential of the positive integration, which benefits arelikely to spread unevenly across regions and social groups.

Keywords

• european union
• euro area
• covid-19 pandemic
• economic integration
• eu economic governance
• eu public finances
• economic growth
• unemployment