Economic shock would leave output level below in pre-pandemic
European Commission projected output level in the Euro area and the EU below its pre-pandemic level in 2022
Brussels– The European Commission today projected the economic shock caused by the coronavirus pandemic would leave output in the Euro area and the EU below its pre-pandemic level in 2022.
This came as EC presented its autumn economic policy package, including the Opinions on euro area Draft Budgetary Plans, DBPs, for 2021 and policy recommendations for the euro area. This is the second step in the 2021 European Semester cycle, which started in September with the publication of the Annual Sustainable Growth Strategy, ASGS, with the concept of competitive sustainability at its heart. The ASGS also provided strategic guidance for the Member States in drafting their Recovery and Resilience Plans and set out the relationship between the Recovery and Resilience Facility (RRF) and the Semester. Today’s package draws upon the Autumn 2020 Economic Forecast – prepared in a context of high uncertainty – which projected that the economic shock caused by the coronavirus pandemic would leave output in the euro area and the EU below its pre-pandemic level in 2022.
The Opinions on the 2021 DBPs take into account the ongoing health crisis, the high level of uncertainty and the severe economic downturn resulting from the COVID-19 outbreak. Given the activation of the general escape clause of the Stability and Growth Pact, the fiscal recommendations issued by the Council in July 2020 were of a qualitative nature. Today’s Opinions, therefore, look especially at whether the planned supportive budgetary measures for 2021 are temporary and if not, whether offsetting measures are planned.
The Commission has assessed that all DBPs are overall in line with the Council’s recommendations of 20 July 2020. Most of the measures support economic activity against the background of considerable uncertainty. Some measures set out in the Draft Budgetary Plans of France, Italy, Lithuania and Slovakia do not appear to be temporary or matched by offsetting measures. Lithuania has submitted its Draft Budgetary Plan based on a no-policy-change scenario and is invited to submit an updated Draft Budgetary Plan.-WAM