Single market and the pandemic: Impacts, EU action and recovery

Briefing 18-06-2020

The coronavirus crisis caused an asymmetric shock to both supply and demand in the EU, inflicting unprecedented economic harm: the deep recession in 2020 is likely to be followed by a fragile recovery in 2021. The downside risks are high and there is a strong possibility of further deterioration. European economies are highly integrated: about two-thirds of the EU's total trade in goods takes place on the single market, through its tightly knit network of supply chains, financial connections and trade relationships. However, the pandemic has severely impacted the free movement of persons, goods and services in the EU, on which the market is based. While the depth of the economic downturn and the strength of recovery vary across EU Member States, many of those that were hardest hit by the pandemic happen to have the least policy space to respond to it. Left unaddressed, an uneven recovery across the EU risks creating divergences, fragmentation and permanent damage to the single market, which will have a negative impact on the EU's recovery as a whole. The EU has acted on many fronts since the onset of the crisis. Initially, it provided first-response measures – such as the suspension of State aid rules and a roadmap for lifting containment measures – designed to address multiple emergencies in the single market and the EU economy. It has also developed a comprehensive longer-term response to enable economic recovery and repair the damage inflicted by the crisis, while at the same time protecting and deepening the single market and rendering it more autonomous. The EU will offer large-scale asymmetric support and financial support, that will be distributed through existing and novel instruments. Some experts warn that the proposed recovery plan, while a step in the right direction, may be financially insufficient and too slow to disburse. The European Parliament has asked for a major recovery package worth €2 trillion.