2021 OECD Economic Surveys: Euro Area 2021

image of OECD Economic Surveys: Euro Area 2021

The COVID-19 pandemic forced most euro area economies into repeated lockdowns in 2020 and early 2021 that lead the euro area into its deepest recession on record. The policy reaction to the crisis was large and rapid. It included, among others, significant monetary and fiscal stimuli, but also an ambitious European plan (“Next Generation EU”) to promote economic recovery financed by joint borrowing. However, a durable recovery will require the completion of an ambitious reform agenda, including to the economic architecture of the currency union. This Survey has three main messages. Firstly, monetary and fiscal policy accommodation should continue as long as necessary for the recovery to become firmly established and inflation to return to the central bank objective. Secondly, the planned discussion of the European fiscal framework is key to buttress macro-economic policy in Europe. Fiscal rules need to be evaluated with the aim to better ensure sustainable government finances, sufficient counter-cyclicality and greater ownership. Thirdly, the risk of divergence among euro area members following the COVID-19 crisis needs to be addressed by considering the establishment of a common fiscal capacity, completing the Banking Union, deepening the Capital Markets Union (CMU), and encouraging reforms of domestic labour markets.


English Also available in: French

From Chapter: Key policy insights

Financial fragmentation was one of the reasons of diverging business cycles during the last crisis

English Also available in: French

This is a required field
Please enter a valid email address
Approval was a Success
Invalid data
An Error Occurred
Approval was partially successful, following selected items could not be processed due to error