To survive the COVID-19 crisis, the euro area can’t go back to business as usual

Continuing austerity and the obsession with government deficits will deepen discontent and fuel anti-EU politics, writes Patrick Kaczmarczyk

 
The Covid-19 crisis has brought the European economy to a standstill. More and more states are taking drastic measures to contain the spread of the virus, while nobody can predict how long these exceptional circumstances will persist. As with any other crisis, we are once again learning that the future is fundamentally uncertain, and that people do not behave in rational, but emotional ways.

The consequences for the economy of this shock, which has hit both the supply and demand side, will be substantial. Yet, if the scope of the outbreak were contained through the emergency measures taken, it may well be the case that in a couple of months, we will be back to normal. The course that the spread of the disease has taken in China and the slowdown of the rate of new infections in Italy suggests that it is more likely to be a temporary crisis, even though a second wave of contaminations cannot be ruled out and this best case scenario should of course not be the baseline assumption for policymaking (neither should the high death toll lead us to downplay the consequences of the disease).

Regardless of when the crisis passes, however, it is already clear that its consequences for the European economy will go significantly beyond the short-term. First of all, the spread of Covid-19 has exposed the danger and fallacy of cutting spending for public health services and outsourcing the production of vital medical supplies overseas. Leaving the issue of public health to profit-driven private companies for reasons of ‘efficiencies’ and a ‘lack of public resources’ lies at the very heart of the problem that we are dealing with. The fact that austerity costs lives is not new, but the Covid-19 crisis has brought it into the spotlight and public conscience.

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Πηγή: blogs.lse.ac.uk