The gross domestic product of the European Union will drop by 9.3% in 2020 to grow by 5.7% in 2021. The International Monetary Fund (IMF) predicts it , underlining that GDP will return "to 2019 levels only in 2022" . For several US countries, the road to recovery will be more difficult than in others and much depends on the conditions to which they slipped in the coronavirus crisis. "The sharp divergences in the initial conditions are likely to result in an uneven recovery across Europe," explains Poul Thomsen of the European department of the IMF.
The European economy continues to need help: "budget support remains vital" but with the passage of time resources "will become narrow" and for this "it is time to look ahead and re-evaluate how best to use the limited space of balance". This was stated by Poul Thomsen of the European IMF Department
There are two objectives for Europe: saving lives and "making sure that Europe emerges with a greener and safer economy for the long term, one in which future generations can thrive".
To face the coronavirus and its effects on the economy in Europe , a "joint action by the European Union" is needed , with funds concentrated on the most affected countries or those with budget space so as to have better results for the market. Sole added Thomsen stressing that it is vital that the action serves as a "catalyst and not as a substitute for structural reforms".
Monetary policy in Europe must remain "highly accommodative" , with "extraordinarily low rates and asset purchases implicitly looking at spreads," Thomsen said that the authorities must ensure that the flow of credit to the economy continues. "For now many European banks have the necessary capital and liquidity," adds Thomsen, however, warning that the situation could change.
Finally for Thomsen "the European countries with high debt are the ones that will make the expenses of the social impact" of the effects of the coronavirus on the economy. "For decades, several countries have seen their high debt increase in difficult times and stabilize, but not decline, in good times," Thomsen points out. This shows weakness in addressing "structural shortcomings whether due to institutional rigidity or insufficient political will.
This has resulted in high unemployment and emigration, especially among young people".