Economic and social prosperity in time of COVID-19 crisis in the European Union

Abstract

In recent decades, the Member States of the European Union have witnessed two international crises: the economic-financial crisis that began in 2008 and the COVID-19 crisis in 2019. Consequently, both poverty and income inequality have increased. Regarding public policies to help overcome these crises, macroeconomic policies of a different cut are observed. Even though the Europe 2020 Strategy had recognized the European Union as a social market economy, to overcome the economic crisis of 2008 it was decided to consolidate public finances to control the public deficit and debt. However, in the COVID-19 crisis, the European Union has opted for an expansionary economic policy to reduce the intensity and duration of the crisis. This study analyses the most remarkable changes introduced in the European Union since the 2000s, as well as the evolution of poverty, extreme poverty, and income inequality. Likewise, two composite indexes were built in 2019 for each Member State: one of human development according to the socio-economic context of the European Union, and another index of governance reflecting the degree of compliance with the European values of freedom, political stability, and Rule of Law. The main objectives are, firstly, to analyse the connection between poverty and income inequality with the economic cycle and the public policies carried out; and secondly, to study the position of the 27 Member States in 2019 to deal with the negative effects of COVID-19. The results allow the Member States to be classified into four typologies, as well as discussing which are better prepared for the next challenges.