Europe Is Still Waiting for a Recovery Fund Breakthrough

Earlier this month, the European Commission released its midyear assessment of the state of European economies. The so-called summer interim report was a lot less sunny than the commission’s initial predictions in May. Right out of the gate, Brussels defined the coronavirus crisis as a watershed in European history, with the report’s first sentence stating that in the first half of 2020 the Continent has seen its “deepest output contraction since World War II.” The majority of EU member states’ economic forecasts, with notable exceptions like Germany, were revised downward by significant margins. Of course, these figures aren’t set in stone. Accounting for uncertainties over supply chain disruptions, investor confidence, external demand and a potential second wave of infections, the picture for Europe’s economy could very well become bleaker. The 52-page report factored in a slew of economic indicators, assessing countries’ lockdown measures and fiscal responses, pre-COVID economic prognoses, net exports, affected industries, changes in inflation rates and joblessness, just to name a few. The report did not, however, account for one potential fiscal boost in its calculations: the “Next Generation EU” 750 billion-euro ($850 billion) recovery package, which will bring the size of the bloc’s revised 2021-27 budget up […]