Member Spotlight

Chief Economist's Note: COVID-19 Could Herald a New Era of European Divergence


KPMG  | Wed, Oct 21, 2020

by Yael Selfin


Key points:

  • Uneven evolution of the pandemic across Europe could widen the gap in growth potential between, and within, countries 
  • Southern European countries, with economies that are heavily reliant on tourism, could be hit by two lost high seasons
  • A gap in fiscal capacity favours countries with fiscal room to spend in support of their economies, despite EU wide initiatives

A resurgence in COVID-19 infections has led to additional measures being announced across Europe in the past two weeks to contain the pandemic. The inevitable economic fallout could slow and even reverse, the nascent economic recovery, bringing with it the danger of a double-dip recession.

While most European economies are under significant strain from the pandemic, their prospects coming out of the crisis diverge. The uneven exposure to the pandemic, varying fiscal room for manoeuvre and the different sector make-up have the potential to drive a wedge between the growth rates of different European economies. 

To continue reading at KPMG , click here.