7 May 2020

The EU’s response to COVID-19: success or lost opportunity?

The COVID-19 crisis represents a common threat for all 27 member states of the European Union; however, Europe has been criticised for being slow to formulate a collective response.

Since the start of the crisis, one of the first important collective decisions came on 17 March when EU leaders agreed to a 30-day ban on nonessential travel of non-EU citizens (or those of associated countries) into the bloc. But across Europe, the severity and timing of other measures have continued to differ from country to country. In the past few weeks, the focus has shifted to the financial aid mobilised by Brussels in response to the corona crisis. And, although we have seen divisions between North and South, the EU has raised significant financial resources to tackle the healthcare and economic effects of the pandemic.

Research highlight

Prof. Clemens Kool is currently investigating country-specific probabilities of a future recession change over time and how they depend on financial conditions in each countries

'It is well-known that the euro area is not an Optimum Currency Area (OCA). That is, individual euro area members can be hit by country-specific shocks without sufficient stabilizing mechanisms. This can lead to divergent economic developments in the euro area and increasing economic and political tensions between countries.

In a current project with one of my PhDs, we investigate how country-specific probabilities of a future recession change over time and how they depend on financial conditions in each countries. Among other things, we find that booming financial cycles in the early Euro period translated into continuously rising recession probabilities in the peripheral euro area countries, but not for the core countries. It suggests that the crisis has been looming for a long time in periphery countries, before the crisis really hit.'

 

By: Clemens Kool