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

69 Social Europe in action: a new importance in the pandemic after a lost decade Björn Hacker With the unprecedented economic downturn in 2020 came a declaration of willingness on the part of the Euro- pean Union (EU) institutions to explore new approaches to crisis management. Short-time work schemes and pu- blic investment projects are helping to safeguard emplo- yment while the Stability and Growth Pact is suspended. The European Health Union and a social action plan are designed to mitigate and pre-empt social hardship. By putting an end to the austerity policies that have played a defining role for over a decade, the COVID-19 pandemic could prove to be a game-changer for European emplo- yment and social policy. This article first examines socioeconomic development in the aftermath of the global financial and economic crisis and then provides a detailed analysis of the EU’s social situation during the pandemic. This is followed by a discussion of the social elements of the pandemic res- ponse and recent initiatives in the area of social Europe. A lost decade: economic development The EU was severely impacted by the global financial and economic crisis in 2009, with the community of states experiencing a downturn in economic performance of -4.3 percent compared to 2008. 1 Not all Member States 1  All data from Eurostat unless otherwise indicated. experienced a proper recovery. From 2011, the euro crisis led to another economic downturn across all Member States. No sooner had most states returned to pre-crisis growth levels than the COVID-19 pandemic hit, reversing the recovery in 2020. Looking at Figure 1 , which shows aggregate economic growth across all 27 EU Member States and all 19 euro area countries between 2009 and 2020, the triple dip caused by the three crises mentioned above is very clear to see. While generous economic sti- mulus programmes, short-time work schemes and other monetary and fiscal policy support measures ensured that the community of states quickly emerged from the global financial and economic crisis, despite the severity of the downturn in growth, and achieved a growth rate of over 2 percent as early as 2010, it would take five years of the euro crisis before similar growth in gross domestic product (GDP) could be achieved. In contrast with the global economic crisis, countries facing liquidity problems were denied Keynesian programmes to support economic growth and were required to implement severe austerity policies in return for credit lines from rescue packages, which were initially slow in coming. The suppression of demand led to a deepening of the recession in the cou- ntries concerned, which had a knock-on effect on their trading partners in the EU.This explains why the commu- nity of states as a whole suffered from weak growth for so long and why the euro area did not fare much worse than the EU as a whole in the period under review.