EU‘s ‘Existential Threat’: Sound Recovery Plan Needed to Avoid Economic Divisions

Written by | Wednesday, May 13th, 2020

The risk of an uneven economic recovery from the coronavirus crisis poses an “existential threat” to the EU, European Commissioner for Economy Paolo Gentiloni has said, adding that the bloc needs a „sound recovery plan“ to avoid economic divisions. Faced with “the deepest economic recession in its history”, the former Italian Prime Minister also stressed the EU had a “historic opportunity” as it charts a plan to rescue its economy. Shuttered factories and shops, stay-at-home consumers and grounded planes as a result of lockdown restrictions mean the EU economy is expected to fall more than during the 2009 financial crisis, projected to shrink by 7.5% in 2020.
The economic commissioner is worried that EU countries do not have the same levels of state resources to rescue ailing companies and pay workers’ wages and, ultimately, to recover from this economic shock. While emergency measures have become easier since Brussels relaxed state aid rules to deal with the crisis, Gentiloni said state aid requests from EU member states were very imbalanced. “What is clear is the uneven level of the recovery and the risks this creates to our single market and the necessary convergence, especially within the euro area. This is something that I could even define as an existential threat to the building of the Union,” he noted.
Meanwhile, there have been mixed news coming from different European countries. The Austrian government plans to reopen the border with Germany on 15 June that has been closed to travelers since mid-March due to coronavirus. The British economy contracted a record 5.8% in March, compared to February, with the Bank of England warning that the the country’s economy could fall as much as 30% in the first half of 2020, before a strong recovery in the second half of the year. As global tourism industry has been hit particularly hard by pandemic restrictions, German travel giant TUI has announced it will slash 8,000 jobs worldwide, which equates to about 10% of its workforce. In Portugal, authorities are planning to reopen hotels and beaches by mid-June, despite coronavirus fears. With about 30 million tourists visiting Portugal every year, the sector is of huge importance for jobs and economic growth.

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