COVID-19 Challenges to the European Economic and Monetary Union: Institutional Responses, Growth Strategies, and Future Prospects in a Changing Macroeconomic Environment—Introduction

Abstract

This special issue aims to answer three questions: How is European economic governance adapting to the COVID-19 crisis? How are member states’ economic policies adjusting to the current crisis and adapting to the European response? How is the COVID-19 health and economic crisis expected to impact their growth policies and reform trajectories? Seeking to answer these questions, the special issue aims to assess the impact of COVID-19 on the core elements of the political economy of adaptation and adjustment in the eurozone. One decade after the eurozone crisis, the COVID-19 induced crisis has revamped the reform process in the European Economic and Monetary Union, prompting a new wave of policy and institutional changes in the Economic and Monetary Union of the European Union (EMU). The perhaps most significant change has consisted in the common effort to fend off the COVID19-induced collective, systemic risks in a more symmetric and mutually supportive way than had happened previously. The policy response rested not only on several tools that were already part of the toolboxes that different European institutions, primarily the Commission and the European Central Bank (ECB), had at their disposal but also through the Member States’ coordinated effort to relaunch investment levels through common bonds emissions (an instrument that had been up to then subject to harsh and unresolved controversies) while momentarily steering away from debt levels reduction. As Sebastian Dullien effectively points out in his contribution, old and new eurozone reforms have all contributed to the COVID-19 crisis having thus far a different, and more equitable, outcome than the 2009 eurozone crisis. This is so, to the extent that the instituted facility (The Next-generation EU) has targeted countries in a proportion roughly corresponding to the estimated negative impact of the crisis (Watzka and Watt 2020). Additionally, the ECB’s Pandemic Emergency Purchase Programme admits for an equally “flexible” application of the capital key. The COVID-19-induced reforms raise two kinds of questions. The first refers to their longterm consequences for the EMU institutional architecture. The second refers to the Member States’ macroeconomic trajectories against the background of the crisis’ long-term consequences