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The EU’s two-step approach to boost the economy
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The EU’s two-step approach to boost the economy


The European Union (EU) has been fast to respond to the economic fallout of the COVID-19 pandemic. All 27 countries have agreed to move forward with the EU’s two-fold response, which is an investment plan that will invest €1,834.3 billion in the coming years to three pillars of recovery: helping member states recover, kick-starting the economy, and learning from the crisis.

Pandemic Restrictions Result in Economic Downturn

The latest figures have revealed that the EU’s economy will shrink by 8.3% this year. Predictions for 2021 are slightly better, with estimates that it will grow by 5.8% but still failing to recover to pre-pandemic levels.

In a recent survey conducted by the Eurofound, 28% of respondents said they’d lost their jobs permanently or temporarily, 40% reported the pandemic had worsened their financial situation, and half claimed that they struggled to make ends meet. Additionally, youth unemployment in the region has risen from pre-pandemic levels of 14.9% to 17% as of July.

To tackle the economic downturn, the EU plans on implementing permanent changes to the EU’s economic and social model, aligning it with the climate and digital agenda. This is an attempt to boost economic growth as well as establish a strategy for the future of Europe.


The State and the Environment

The approach is “two-fold” due to its focus on two main goals: to emphasize the role of the state and to make climate and digital ambitions a priority. Without the states’ interventions, the COVID-19 cases in Europe would be far worse. The pandemic has highlighted the member states’ wishes to be more autonomous when it comes to strategic planning, and for this reason, climate and digital ambitions have been underlined and will be the main focus moving forward.

The Three Pillars

The EU also plans on distributing funds between three pillars that have been selected as focus points for economic recovery.

The first pillar will see 405 grants and 250 loans be dedicated to programs and organizations, including the Recovery and Resilience Facility, REACT-EU, rural development, and the Just Transition Fund. Pillar two would include kick-starting the economy and helping private investments by investing a provisional total of 56.3 grants to the Solvency Support Instrument, InvestEU, and the Strategic Investment Facility. Finally, pillar three will support the Health program, rescEU, Horizon Europe, Neighborhood, Development and International Cooperation, and Humanitarian aid by providing 38.7 grants.

The rest of the funds will be spent over seven years on the EU’s multi-annual financial framework (MFF).

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