THE STATE OF THE EUROPEAN UNION. Reforming Europe in a time of war

43 Politics in Europe: elections, changes and trends Carlos Carnero and José Candela Deciding in turbulent times In March 2020, the Covid-19 pandemic triggered a pe- riod of global uncertainty and political, economic and social complexity that is still going on today. Indeed, it is not possible to predict when and how we shall return to a stability worthy of the name. The disease dealt a sudden, swift and brutal blow, leaving an irremediable trail of loss of human life and suf- fering, and led to an economic and social crisis different to the one we now call the Great Recession. This time, the problems did not arise from the excess- es of finance capitalism, nor did they manifest themselves in the now famous risk premiums. The cause here lay in an exogenous factor that had brought economic activity to a standstill for months, disrupting production, con- sumption, employment, saving and global supply chains. Because of that, and because of the lessons learned a decade ago, the response of governments was to steer clear of austerity and embrace Keynesian-style counter- cyclical policies, prioritising the role of the public sector in securing the goals of reviving economic activity and stemming the rise of unemployment. It is fair to say that the European Union (EU) response to the crisis was particularly effective, with positive re- sults across the board.The suspension of the Stability and Growth Pact, the creation of such innovative instruments as NextGenerationEU and joint debt issuance to fund it, among other decisions, would mark a turning point between the two crises experienced by Europeans in the first 20 years of the 21st century. The recovery of growth, the preservation of the framework of production and the protection of employ- ment from the second half of 2020 through to early 2022 are testimony to the success of the European policy. However, we must add that the global disruptions caused by the pandemic have eventually reared their head, particularly in the shape of rampant inflation, which has hit heights not seen for decades. Inflation that has compounded the third major blow to the EU in just two years: the war in Ukraine. This has slowed the economic recovery that had been proceeding apace and brought major energy supply problems. In addition, the inflation caused by the war has eased the return to the field of play of the economic hawks, who favour combating the phenomenon with sharp, swift interest rate hikes and a reversion to austerity, even at the expense of a recession and the consequent disap- pearance of businesses and jobs. In the landscape shaped by the Keynesian policies mentioned above, the EU has enjoyed a political stability that has allowed the pro-European parties to maintain their ascendancy, averting, with some far from insignifi- cant exceptions, the rise to power of anti-European and far-right alternatives. In other words, the solid response to the pandemic and the economic and social crisis has ensured the nor- mal functioning of democracy in extremely grave and