Europe could support its economy much more widely if, like the United States, it went further in fiscal integration, explains Philip Lane, chief economist of the European Central Bank (ECB). In an interview with World, he stresses that if the European recovery plan of 750 billion euros will support the recovery over the next five years, governments will have to maintain their aid for many more months.
After the violent recession recorded at the beginning of 2020, the gross domestic product (GDP) of the euro zone fell again at the end of 2020 and the beginning of 2021. How is the economy today?
Rather than following the quarterly growth figures, it is better to compare with the level of activity of 2019. Today we are probably 4% or 5% below. It is a considerable contraction. During a classic recession, the decline is rather 2% or 3%.
I think that we are now, in May and June, at an economic turning point. From now on, the economy will grow rapidly, but starting from a low level. This means that even with dynamic growth over the rest of the year, the euro area will not return to its 2019 GDP level until spring of next year. In the labor market, the unemployment rate is expected to return to its 2019 level in 2023 only. It will be a long way. It will require a prolonged fiscal and monetary effort to support the recovery.
What scars will the Covid-19 pandemic leave on the economy?
There are reasons to be optimistic. Compared to the decade since the 2008 financial crisis, the pandemic will be an event that will last two or three years. The recession will be shorter and the scars may remain limited. But there are also sources of concern. The lockdowns related to containment have not only affected the economy. Education and health have also been disrupted, which will have lasting consequences. The effects of the pandemic are also very concentrated in certain sectors: hotels and tourism, in particular, which will be penalized for a long time.
The world after will not be the same. There will be structural changes, there will be losers and winners. Those who work in city centers and provide services for office spaces or those who work in the travel sector, for example, will be more affected than those who can continue their activities by telecommuting, as in the technologies of the information.
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