As in the previous crisis, the United States has reacted more strongly than Europe in the recovery due to a much faster response. In this case, vaccination has been key, although it has not been the only reason, as reported in an article published today by the Bank of Spain, which calculates that if at the end of the first quarter of 2021, instead of 12% the The Eurozone would have immunized 29% of the population as the US did, the continental recession would have been avoided at the start of the year. Not only that, but it “would have allowed for somewhat higher growth in the second” quarter. “In terms of the year as a whole, this impact would mean that EMU GDP in 2021 was, on average, 0.7 percentage points higher», Reviews the document.
Thus, The US would achieve its pre-crisis GDP level by mid-2021, while in the countries of the common currency this would not happen until the beginning of 2022 – with states like Spain where it would be achieved even later. The US fell 3.5% in 2020 compared to 6.7% in the Eurozone – a 10.8% collapse in the case of Spain.
Restrictions, one less point of fall
Part of the different drop is explained in the lower restrictions approved in the United States. “Since the beginning of the Covid-19 pandemic, the restrictions applied to contain the spread of the virus have been less severe in the US than in the Economic Monetary Union,” the Bank of Spain reports. Although this fact has caused a more unfavorable epidemiological evolution in the United States, It has also resulted in a lower reduction in mobility in this country, from 16% in the 2020 average compared to 20% in the Eurozone. According to the document, this makes it possible to explain around one percentage point of greater economic impact of the health crisis in the countries of the common currency. In the case of Spain, the impact was three times greater, due to the greater drop in mobility and the weight of services in the economy.
The Bank of Spain does not detect that the different weight of the tertiary sector explains the gap in the behavior of the activity, since the importance of services is similar in both areas. Manufacturing, however, has a greater weight due to the growing trade openness in the Eurozone: this would result in a further drop in activity in 2020, when this sector, which is now recovering faster, suffered a 20% drop on this side of the ocean.
Added to this is a greater fiscal stimulus in the United States, although the supervisor admits that this issue is “complex” due to the different weight of automatic stabilizers, such as unemployment insurance and others.
Better behavior in every crisis
The truth is that in the historical average from 1979 to 2019, the United States has taken much less time to recover from crises than Europe. «The role of public policies, both in the field of containing the pandemic and in the economic sphere, could explain part of these differences, in addition to other structural factors related to the greater sensitivity of the EMU to the evolution of trade global (which was hit hard in the first half of 2020) and with the greatest flexibility that the US economy has historically shown», Ruling the Bank of Spain.