By Stella Ladi, Angie Gago, Catherine Moury and Daniel Cardoso
As governments around the world grapple with the public health and economic effects of the COVID-19 pandemic, there are striking similarities with the eurozone crisis that followed the 2008 financial crisis. Having researched this crisis, it is clear to us that there are some important lessons to apply to today’s recovery. The early signs indicate that the EU is responding much more effectively to this crisis than it did in 2008.
Many European governments are increasing their spending to compensate for the economic losses of lockdowns, as they initially did in the wake of the 2008 financial crisis. This is necessary when an economy contracts but relies on a rise in public debt – and the figures are much higher this time around. According to IMF forecasts, by the end of the year public debt will reach almost 100% of GDP in the eurozone on average. Italy, Greece, France, Spain and Portugal will exceed this.