THE STATE OF THE EUROPEAN UNION REPORT. Europe in a period of transition

59 The fiscal effort to combat covid-19: Europe and the United States Domènec Ruiz Devesa and Rosa Pérez Monclús Introduction In contrast with the 2010 financial crisis, Europe has adopted fiscal stimulus measures and an expansive monetary policy in its fight against the economic crisis caused by covid-19. The European effort has culminated in a Recovery Plan worth 750 billion euros, funded by the issue of European debt, backed by the EU budget and to be repaid through the creation of new EU resources. In other words, Europe’s recovery measures have an intrin- sically federal character. However, Europe is not an isolated continent but rather a fully integrated participant in an interdepend- ent global economy. To identify whether Europe’s effort to combat the economic consequences of the pandemic is sufficient or not from an international perspective, it should be compared to the efforts of other countries.The United States is the natural point of comparison for such an analysis, as it is an advanced economy, with a federal structure, and a population of a similar magnitude. 1 Although the coronavirus crisis is an external sym- metrical shock that has affected all countries at the same 1  329 million inhabitants in the case of the USA, compared to a figure of 447 million for the EU (World Bank, 2020). time, it has not affected all of them equally.After the start of the pandemic, the US economy contracted by 5 per cent in real terms during the first quarter of 2020, fol- lowed by a collapse of 31.4 per cent in the second quar- ter (BEA, 2021). This unprecedented fall was followed by an equally pronounced recovery, with growth of 33.4 per cent in the third quarter of 2020, and 4 per cent in the final quarter. In comparison to 2019, GDP fell by 3.5 per cent in 2020. According to the OECD (2021), this trend will be reversed in 2021, with real GDP predicted to grow by 6.9 per cent in 2021 and by 3.6 per cent in 2022. In 2020, real GDP fell more sharply in the Eurozone than in the United States, with a drop of 6.5 per cent in the single currency area and 6.1 per cent in the European Union as a whole in 2020 in comparison with 2019. However, the European Commission estimates that GDP growth in the EU and the Eurozone for 2021 will be 3.7 per cent and 4 per cent respectively, and that real GDP will regain the levels prior to the crisis in the second quarter of 2022 (CE, 2021). Stricter lockdowns in the Eurozone, manufacturing shutdowns of varying inten- sity, the different timing of the pandemic waves, and divergent political responses are some of the reasons that underlie the greater fall in GDP in Europe, according to the European Central Bank (Anderson et al., 2021).