It's always the case that one thing leads to another. The study of the future often consists of no more than simply joining all the dots to see where we arrive. The pandemic has provide a number of opportunities to engage in this type of thinking, both for the near future and for further ahead. The most striking aspect of the pandemic is that it has had a different impact in different countries. The virus is broadly the same, saving a few mutations, so much of the differing experiences of the pandemic are the result of policy decisions.
Some countries have risen to the challenge of the pandemic very well. Others not so well. However, as we progress through the second wave of infection, we find that those who did well in the first wave may not be doing so well through the second wave. The key difference between the first wave and the second wave is the vaccine. This is a question of policy approval, adoption, and roll out. The race is now on to vaccinate as many people as quickly as possible. In this, performance to date is rather patchy.
The question of Europe arises in this context. Generally speaking, Europe had a good first wave, especially when compared to America. Lockdowns were imposed sooner and with tighter conditions than the US. Infections rates were lower, as were death rates. The economic policy response was slower in the Eurozone - it still has to be deployed - and frugal to the point where some may question its usefulness. This suggests that the economic fallout from the pandemic will be harsher and longer lasting in the Eurozone compared to the US.
America went into the second wave with GDP more or less restored to where it had been a year earlier. Europe, on the other hand, was operating at about 10% lower GDP than a year previously. This is now where institutional factors start to have an impact. The roll out of the vaccine is derogated to national governments in Europe, whereas the approval and roll out is determined at the European level. This hasn't been as nimble as it could have been. The approval and deployment of the vaccine has been slower than the US. Joining the dots, it means that the return to 'normality' - whatever that may mean - will take longer, periods of lockdown and will be longer, and periods of economic inactivity will be longer. This suggests that the Eurozone economy will be hit harder than that of the US over the course of the pandemic.
It is hard to assess the consequential impact of this because we don't know the point to which the Eurozone will recover. We don't know the likely path to recovery. We can only assume that the fiscal response will be sluggish and that the ECB will continue to pump liquidity into the system. All of this suggests a rather stagnant recovery that will be delayed compared to other economies.
As things stand, there is the potential for this to develop into something more serious over the longer term. A delayed and sluggish recovery could permanently scar the Eurozone economy, leading us to question if Europe could ever catch up? A stressed recovery could see the flaws in the architecture of the Euro become fissures. Of course, many have speculated on the demise of the Euro before. They have been wrong, but there is always that nagging sense that perhaps this time might be different?
Stephen Aguilar-Millan
© The European Futures Observatory 2021
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