Miķeļa Zondaka prezentācija Latvijas Universitātē 2022. gada 7. novembrī.

1. European economic
recovery:
prerequisites for sustainable
development
Miķelis Zondaks
Chief Economist of Secretariat to
the Council & International
Relations Division
7th November, 2022

2. Lecture outline
What happened during
the Covid-19 in economy
What was the response
How it’s going on
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3. Once in old times…

4. Global GDP and global PMIs dynamics GDP changes and forecasts in November 2020
(index)
Source: European Commission.
Falls and rises – differences in both national and sectoral and
quarterly breakdowns (1/2)
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5. Covid-19 infections (14 days average) Oxford Stingency Index and GDP (2020-H1)
Source: European Commission.
Falls and rises – differences in both national and sectoral and
quarterly breakdowns (2/2)
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6. GDP, employment and hours worked in Eurozone
(index)
(Un)employment expectations in Eurozone
Source: European Commission.
As a result, dark clouds tightened above the labor market
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7. Electricity consumption in Eurozone Brent oil price (EUR and USD)
Source: European Commission.
Falling energy prices also undermined inflation
HICP in Eurozone
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8. Different impacts
National (regional), sectoral and time-
wise.
Significant constraints on
supply chains
Deficit causes price rise for raw
materials and products.
Falling demand for energy
resources
Reduced prices impacts inflation.
Summary
Shock and high uncertainty: no
one expected a pandemic, was
not prepared for it and did not
know its duration (it is still
unknown, but we have adapted
quite a lot)
Long-unobserved phenomenon
Restrictions on mobility was something
EU hadn’t seen for a while.
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9. What was the vaccine for the
economy?

10. Long-term interest rates for Euro area and
selected EU countries (%)
Total government debt (% of GDP)
Source: OECD and ECB.
Low interest rates allow to borrow well
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11. Changes in government debt to GDP
(p.p., 2020Q1/2021Q1)
Temporary and permanent support measures
(% of GDP, 2021)
Source: Eurostat and European Commission.
But not everyone has the same capabilities
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12. EU level support instruments in place

13. Uses of SURE (% of loan)
Source: European Commission.
SURE - The possibility for EU Member States to borrow to
finance employment support measures
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14. NextGenerationEU
(NGEU)
Funding: bond issuance and own
resources
Supplement to the EU multiannual
budget
Priorities: the green and digital
transformation of the economy,
the promotion of resilience and
the reduction of inequalities.
€750 billion recovery plan
Source: European Commission.
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15. Available and requested
funding from the RRF (% of
GDP 2020)
Source: ECB
Recovery and Resilience Facility - the key instrument for the
NextGenerationEU
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16. Fit for 55 overview
Source: Bruegel.
Fit for 55 - commitment to reduce emissions by at least 55% by
2030
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17. New year, new… challenges!

18. REPowerEU plan
Improvement of energy efficiency and
promotion of circularity
Development of the EU hydrogen market
Improvement in the interconnection of
European electricity and gas networks
Acceleration of the development of
renewable energy
Main aim is reduction of EU’s
dependency on fossil fuels and
diversification of supplies.
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19. Did that help?

20. Euro area real GDP (index, 2019Q4 = 100)
Source: ECB.
Economy is recovering, but plenty of challenges still left.
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21. Confidence in service subsectors in the EU Containment measures in the EU
Source: European Comission.
Service sector seems to be recovered from Covid-19
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22. Employment in the EU
Source: European Comission.
Labour markets on a strong footing
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23. Euro area countries budget balance and its components (% of GDP)
Source: ECB.
After the spending spree, going back to normal migh not be as
easy as it seems
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24. Headline inflation and its main components (%, y/y; percentage point contributions)
Source: ECB.
Challenge for everyone – high inflation rises cost of living
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25. Inflation in EU countries (%, 2022)
Source: European Comission.
Although high
everywhere, the levels
vary across the EU
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26. Euro area energy consumption by primary fuel type (million TJ)
Source: ECB.
The problem is not only the price of energy but also the source
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27. Questions

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