Economic Assessment of the Euro Area: Winter 2020/2021

Against the backdrop of European economies being in partial lockdown again due to the Covid-19 pandemic, this report presents an assessment of the economic outlook for 2021 and 2022 focused on the euro area based on a synopsis of the forecasts of Euroframe institutes. Overall, EUROFRAME institutes expect that the currently still depressed activity will progressively recover in the course of this year and next, supported by the rollout of vaccines that has finally started. On average, GDP is expected to rise by 4.9 per cent in 2021 and 3.1 per cent in 2021, following a dramatic fall of output by 7.4 per cent last year. The focus section of the report provides a review of labour market developments and labour market policy reactions to the crisis in the host countries of the EUROFRAME institutes. The Covid-19 crisis led to a sharp fall in hours worked, but a comparatively modest rise in unemployment. The analysis shows that a wider measure of unemployment, including workers on short-time work or furlough schemes, suggest much higher rates of unemployment of up to 35 per cent in some countries.