The economic consequences of the pandemic in the European Union

The pandemic has dramatically highlighted and aggravated the inequalities that characterize our age. European countries are generally the most affected among the more developed countries, but remedies appear wholly inadequate.

Now the European Commission is about to judge the consistency of the national plans with the reference frameworks set in Brussels for the next few years, and will give its judgment over the course of the summer. Waiting for the judgment that is particularly anticipated by the countries most in difficulty, it is worth making some comparisons between the economic and social consequences of the pandemic and the intervention models adopted in the most affected countries.

The framework is, indeed, very heterogeneous. Much of the developed world reacted quickly enough. The United States expects to have overcome the emergency before summer this year with the vaccination of at least 200 million citizens. China, the first major country hit by the pandemic, has shown a massive and timely reaction, and has already moved towards normalization during 2020. Many other countries, from Japan to Australia, have shown a remarkable ability to control the  pandemic attack.

But, unfortunately, this success is not global. India is facing a disastrous situation with enormous human consequences given that it is a country of one billion and four hundred million inhabitants. In Latin America, from Brazil to Mexico. the pandemic continues to claim an enormous number of victims. In Africa from South Africa to Egypt many countries have been heavily hit.

The inequality of economic and social conditions manifests its most brutal consequences. And there is no other way to mitigate its impact than to increase the production and distribution of the various antiviral drugs, which medical research has implemented in an extraordinarily short time.

In this fragmented and dangerous framework it is, indeed, difficult to place the condition of most European countries. Europe is the region of the planet with high level scientific and economic resources. But the comparison with other economically advanced areas is daunting. The main countries of the European Union: Italy, Spain and Germany, as well Netherlands and Belgium, are still in the midst of the pandemic while the mutations of the virus tend to increase its danger.

The policy to combat the pandemic has been centralized to the governing bodies of the European Union. The choice of centralization may have had a plausible explanation in the capacity of centralized institutions to provide and distribute the vaccine in a sufficient and balanced way for all EU countries. The result was dramatically disappointing. The European Commission was unable to acquire and supply the appropriate doses to each member country.

At the same time, despite the spread of the pandemic, and the inability to provide sufficient doses, the European Commission has irrationally vetoed the acquisition of additional doses by the most affected countries when the same or different sources were available. So, we have seen Hungary using supplementary doses of the Russian vaccine in violation of the provisions of Brussels, and Serbia inviting citizens of other countries to Ljubljana to get free vaccinations with vaccines from different sources.

That the countries of the European Union belonging to the group of richest countries on the planet and at the top of scientific research in the medical field are in a condition of relative impotence or, in any case of serious delay, compared to the more developed countries on a global level does not have a logical and acceptable explanation.

The case of Great Britain is enlightening. After the initial mistakes of Prime Minister Johnson, convinced that the solution was to develop herd immunity, the government has reversed course. Johnson had to change his mind. In a short time, 50  million inhabitants were vaccinated. The alarm has subsided and the population is resuming a normal, albeit cautious, lifestyle. The comparisons inexorably testify to the errors and human consequences that resulted from the political governance that the European Union has assumed in regard to the most serious collective event that has occurred in recent decades.

It is clear that the role of public intervention is decisive in determining the timing of a recovery. If we take back the countries that were originally most affected, we see that at the end of the current year the recovery of the economy is fully completed or close to completion. In China, national income growth of more than 8 percent is expected by the end of the year.

 In the United States, a return to pre-pandemic national income is expected by the first part of 2022. Meanwhile, the unemployment level, which had surpassed the whopping 15 percent figure, is moving towards the 5 percent. In Great Britain, according to current indications, the forecast of growth in national income at the end of 2021 at around 7 per cent, as the  effects of the policies implemented by governments, prevail.

In the European Union, as we know, the most important decision was an intervention of 750 billion euros to support the economic recovery of the member states. Italy and Spain, the countries with the largest populations, after Germany and France, will participate to a greater extent in the distribution of these resources with about 190 billion earmarked for Italy.

Summing up, all the financial resources dedicated to combat the economic pandemic consequences, starting with the expenses already done in the past year, in course and programmed,  amount to about 450 billion of euros. But the problem is not in this amount that can be more or less comparable with the expenses decided in other big countries.  The difference is that about half of these financial resources will be available in the course of the next six years. In effect for investments that were needed also before the pandemic, but not directly addressed to its  economic and social consequences.

To make a comparison, the United States - in addition to the 4.9 trillion dollars already allocated for immediate expenditure  - has forecasted 2 trillion dollars for investments directed at increasing infrastructure spending and household income over the next years.

The confusion between immediate resources destined to fight the ongoing attack of the pandemic and those planned for the next years is favored by the representatives of the industrial sectors who will be able to enjoy the resources coming from Brussels independently from the current and immediate economic and social needs. The confusion serves, in fact, to mask the heavy economic and social consequences of the pandemic already underway.

 According to the government's official forecasts, with the expected flow of resources from Brussels, Italy will return to pre-pandemic national income only between 2023 and 2024. That is to say, a national income of about five points lower than that of 2008 and more or less equal to that of the beginning of the century, before the entry into force of the euro. Meanwhile, the distribution of income has had a perverse trend, favoring the great fortunes and the accumulation of huge resources put in bank deposits, while the incomes of the middle classes have decreased and the poverty rate has largely increased.

We are facing the failure of the policy imposed by the eurozone authorities in the last decade after the 2008-09 financial crisis. The growing budget deficit and public debt resulting from the collapse of the economy caused by the pandemic can only be recovered with a strong  upturn of the economy  able to reduce the percentage of debt in GDP. It is a matter of fact that only GDP growth can help reduce the relative burden of public debt.

This is the direction in which the main countries of the Western world are moving. The direction taken by the European authorities goes in the opposite sense. Recognizing this is not the solution. But no solution will be found without acknowledging the failures of the policy hitherto practiced by the authorities that govern the European Union and the Eurozone.