The Legacy of the Pandemic: How Covid-19 is Reshaping Economic Policy in the EU

CEPR Policy Insight No 109

Marco Buti, George Papaconstantinou

The economic policy response to the Covid pandemic broke new ground, in terms of its ambition, the tools used, and its institutional characteristics. This paper argues that three sets of factors explain this: our evolving understanding of macroeconomics; the nature of the current crisis; and the policy learning from the financial crisis. It also reviews the emerging institutional landscape at EU level, with its combination of rules-based and institutional features, and assesses the critical factors for successful implementation of the Recovery and Resilience Plans at national level. The paper finally contends that four sets of issues will be important in shaping the legacy of the pandemic for European integration: redefining the new boundaries between state and market; revisiting the nature of subsidiarity; reconnecting the EU domestic with the global agenda; and learning to respond to longer term structural shifts.