Main developments and key challenges in the European social market economy

The COVID-19 crisis halted the positive evolution of the EU economy and of employment in the EU. In 2019, EU GDP had increased by 1.5% (1.3% in the euro area), which is 0.6 percentage points (pps.) less than the previous year and the lowest growth since the recovery that followed the downturn of 2012-2013. However, the European Commission’s Summer Forecast of July 2020 projects a fall of EU GDP of as much as -8.3% in 2020. Already in 2020 Q2, after a drop of -3.3% in Q1, it fell by -11.4%. This is the sharpest decline by far since time series started in 1995. Employment dropped by -0.2% in 2020 Q1 and it shrank by -2.7% in 2020 Q2, after rising for twenty-five consecutive quarters. The lockdowns imposed across Europe in spring 2020 to stem the spread of the virus are expected to lead to a significant decrease in employment in 2020 compared with 2019. The EU unemployment rate, which in 2019 fell to the lowest level ever recorded (6.7%), is expected to rise in 2020 to 9% in the EU and 9.6% in the euro area as a result of the COVID-19 outbreak, before declining again in 2021.