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Europe at the Crossroads of the COVID-19 Crisis: Integrated Macroeconomic Policy Solutions for an Asymmetric Area

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New Challenges for the Eurozone Governance
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The economic crisis triggered by the COVID–19 pandemic once again raises doubts about the eurozone’s ability to deal with joint economic problems given its dissimilar dynamics and asymmetries. This chapter contributes to a paradigm shift in the governance of the euro area towards a more comprehensive and integrated approach. Two dimensions of this paradigm are considered. First, the need for a change in the economic policy concerning the recovery, from a supply-push to a demand-pull orientation, supported on a fiscal and monetary policy mix, integrated within a comprehensive macroeconomic approach. Second, we examine the need for a shift in external relations towards a more global integration-oriented policy, with the euro area positioning itself as an alternative to the current polarization between the United States and China. Our conclusions point to: (i) giving priority to growth and employment; (ii) promoting long-term economic sustainability based on integrated macroeconomic policies, the reduction of income concentration, and the reconstitution of strong middle classes; (iii) reorientating international relations into a perspective of cooperation; (iv) reinforcing regulation and global governance; and (v) eliminating exceptional situations and ways to evade economic controls.

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  1. 1.

    Preliminary flash estimates for the second quarter, published after the writing of the current chapter, confirm the worst scenarios: GDP down by 12.1% in the euro area and by 11.9% in the EU and −15.0% and −14.4% respectively compared with the second quarter of 2019 (Eurostat 2020).

  2. 2.

    The preference for the PWT dataset (Feenstra et al. 2015) is justified based on the need to establish comparisons between economies that have their economic activity expressed in different national currencies. The data used in this analysis correspond to the logarithm of the expenditure-side real GDP at chained purchasing power parities and measured in millions of 2011US$, divided by the total population.

  3. 3.

    Malta is the exception, data for this country starting in 1999. The coefficient of variation for the EA-19 was calculated considering 18 countries until 1998 and adjusting for Malta data thereafter. Bulgaria and Romania have data from 1989 on, making data for the EU-28 to start there, and the coefficient of variation was again adjusted for Malta following 1999.

  4. 4.

    For a more in-depth discussion of this subject see Stiglitz (2016).


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Mendonça, A., Vale, S. (2021). Europe at the Crossroads of the COVID-19 Crisis: Integrated Macroeconomic Policy Solutions for an Asymmetric Area. In: Caetano, J., Vieira, I., Caleiro, A. (eds) New Challenges for the Eurozone Governance. Springer, Cham.

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