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Europe's COVID Crossroads

Beyond the immediate threat to public health, the coronavirus has also pushed most European economies onto a slower growth track, all but ensuring a more difficult recovery over the long term. To prevent the worst, EU policymakers must address the looming shortfall in public and private investment.

WASHINGTON, DC/GENEVA – Central banks have learned a lot from previous crises and are now acting on those lessons. But economic policymakers at all levels must avoid the age-old trap of fighting the last war.

To be sure, as has been widely noted, central banks on both sides of the Atlantic met the economic fallout from the COVID-19 pandemic faster and on a greater scale than ever before. Major decisions were made in the space of just days or weeks, rather than months or years, as was the case after the 2008 global financial crisis. This decisiveness has averted a complete economic collapse, and possibly the breakdown of many societies.

But we are still in the rescue phase of the current crisis. Soon enough will come the time for recovery, for envisioning a better world. The precise meaning of “better” will be discussed in due time. But for Europe, the immediate issue is what to do next, after the 2008-2012 playbook has been fully deployed.