Europe's experiential response to the Covid-19 existential shock

Still reeling from the economic and social aftershocks of the financial crisis, the Covid-19 pandemic confronted Europe with an even more dramatic existential shock. The pandemic has hit the member states of the European Union hard, with a lasting impact on both health and livelihoods. At the time of writing the pandemic has already resulted in close to 1 million virus-related deaths in the EU, separated families from loved ones, driven many workers into under-and unemployment and kept many children from attending school in person for an extended period. Except for front-line workers, many employees shifted to working from home.

In comparison to the Great Recession, the political response to the pandemic and the associated economic fallout was extraordinarily vigorous, both at the EU level and across the member states. Overwhelmed by the Covid-19 existential shock, policy-makers rushed to adopt a frame of national solidarity and collective effort in the first half of 2020. The “freezing of the economy” by lockdown restrictions and social distancing was assertively bridged by a bonanza of furlough schemes, wage subsidies and fiscal stimulus measures. These measures played a key role in preventing loss of livelihoods – and of lives – so as to ensure compliance with lockdowns and social distancing measure and buy time for the development of effective vaccines.

Since the onset of the pandemic in early 2020, EU governments have invested in extraordinary (and extraordinarily costly) emergency measures – from cash transfers to support households’ and companies’ liquidity, to massive retention schemes to save jobs, to sizable public investments to rekindle economies. Fiscal support by member states in 2020 amounted to around 8 per cent of GDP – twice as much as before the pandemic, and significantly more than what was provided in 2008/9 during the early stages of the Great Recession. Certainly, responses differed between EU countries, in part because of the differential impact of the pandemic and the varied characteristics of the national welfare regimes. But all countries reacted through swift and massive deficit spending and expansionary fiscal policy to protect incomes and jobs.