Siljak, Dzeni a
A icle
'C ises a ound he wo ld ha e been mo e equen and
deepe ': Bu how do hey impac EU con e gence?
Economies
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Sugges ed Ci a ion: Siljak, Dzeni a (2025) : 'C ises a ound he wo ld ha e been mo e equen and
deepe ': Bu how do hey impac EU con e gence?, Economies, ISSN 2227-7099, MDPI, Basel, Vol.
13, Iss. 8, pp. 1-17,
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Published: 24 July 2025
Ci a ion: Šiljak, D. (2025). “C ises
A ound he Wo ld Ha e Been Mo e
F equen and Deepe ”—Bu How Do
They Impac EU Con e gence?
Economies,13(8), 214. h ps://doi.o g/
10.3390/economies13080214
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A icle
“C ises A ound he Wo ld Ha e Been Mo e F equen and
Deepe ”—Bu How Do They Impac EU Con e gence?
Dženi a Šiljak
Ins i u e o Ad anced S udies K˝oszeg iASK, Che nel S ee 14, 9730 K˝oszeg, Hunga y; [email p o ec ed]
Abs ac
This pape analyzes how wo majo economic down u ns—a ecession and a s ag la ion—
a ec ed con e gence in he Eu opean Union (EU). Absolu e and condi ional con e gence
a es a e es ima ed using o dina y leas squa es (OLS) semilog eg essions based on c oss-
sec ional da a om 2004 o 2022. The s udy es s wo hypo heses: he e was no absolu e
con e gence in he EU du ing ei he he ecession o he s ag la ion pe iod, and condi ional
con e gence occu ed du ing he ecession bu no du ing s ag la ion. The eg ession
esul s indica e ha nei he hypo hesis can be ejec ed. Ex e nal a iables—economic
openness, in la ion, and in es men —we e mo e in luen ial du ing s able pe iods, whe eas
in e nal a iables—deb , unemploymen , and he con ol o co up ion—had a g ea e
impac du ing c ises. These indings sugges ha he EU was mo e ins i u ionally p epa ed
o he s ag la ion due o mechanisms de eloped a e he inancial c isis, bu hese ools
p o ed less e ec i e in add essing supply-side shocks.
Keywo ds: con e gence; Eu opean Union; economic down u ns; COVID-19 pandemic
1. In oduc ion
In his book Globaliza ion and I s Discon en s (2002), Joseph S igli z w o e ha “c ises
a ound he wo ld ha e been mo e equen and deepe ” (S igli z,2002). While his c i ique
was di ec ed a he In e na ional Mone a y Fund (IMF) and i s ailu e o ul ill he ounding
mission o p e en ing inancial ins abili y, his insigh is equally ele an o he Eu opean
Union (EU). In i s nea ly 70-yea -long his o y, he EU has aced se e al economic challenges,
wi h he mos se e e occu ing in he pas wo decades: he 2009 inancial c isis and he
eu o a ea c isis (collec i ely e e ed o in his pape as he “ ecession”), and, mos ecen ly,
he combined shocks o he COVID-19 pandemic and he wa in Uk aine (in his pape ,
he “s ag la ion”). Each o hese challenges equi ed cons an change and ins i u ional
adap a ion, as hey a ec ed he EU as a whole and indi idual membe s a es as well. A key
cha ac e is ic o EU s udies o e he pas decade has been a en ion o c ises
(Rhina d,2019)
.
Du ing he ecession, he EU esponded wi h se e al majo policy inno a ions, in-
cluding he es ablishmen o he Eu opean S abili y Mechanism (ESM), he in oduc ion
o he Mac oeconomic Imbalance P ocedu e (MIP), a ange o mone a y measu es by he
Eu opean Cen al Bank (ECB), and he con o e sial use o iscal aus e i y in c isis-hi
coun ies, so, heo e ically, i was be e p epa ed o he s ag la ion. The e o e, his pape
analyzes how he wo c ises a ec ed he con e gence p ocess wi hin he EU by es ima ing
absolu e and condi ional β-con e gence models in he pe iod 2004–2022.
Con e gence, de ined as a endency o poo coun ies o g ow as e han ich coun-
ies (Ba o & Sala-i-Ma in,1992), has long been a ocus o he EU. F om he c ea ion
Economies 2025,13, 214 h ps://doi.o g/10.3390/economies13080214
Economies 2025,13, 214 2 o 17
o he Eu opean Regional De elopmen Fund o p o ide inancial assis ance in he p e-
and pos -accession pe iods, he EU has helped less de eloped membe s a es ca ch up.
The aim o his esea ch is o analyze he e ec s o wo di e en economic down u ns—a
demand-side ecession and a supply-side s ag la ion—on absolu e and condi ional eco-
nomic con e gence in he EU. Analyzing he wo ypes o con e gence in andem is well
es ablished in he li e a u e (Ibid), as i helps explain how s uc u al di e ences among
coun ies a ec hei g ow h ajec o ies and, consequen ly, he con e gence p ocess. The
main esea ch ques ion o his pape is he ollowing: Was he EU genuinely be e p epa ed
o he s ag la ion, ha ing aced ano he c isis wel e yea s ea lie , o we e he c ises so
undamen ally di e en ha p epa a ion made li le di e ence? To answe he ques ion,
wo esea ch hypo heses a e es ed:
H1: Absolu e con e gence wi hin he EU ceased du ing he ecession and s ag la ion pe iods,
ela i e o pe iods o economic s abili y.
H2: Condi ional con e gence wi hin he EU was mo e likely o occu du ing he ecession han he
s ag la ion pe iod due o he di e en na u es o he wo c ises.
Al hough ecen s udies ha e examined he impac o he COVID-19 pandemic on EU
con e gence, his esea ch builds on ha wo k by o e ing a di ec compa ison be ween wo
s uc u ally di e en c ises and hei espec i e e ec s on bo h absolu e and condi ional
con e gence, which is he no el y o he esea ch. This app oach allows o a deepe
unde s anding o how he na u e o economic shocks shapes con e gence dynamics in
he EU.
The pape is s uc u ed as ollows: A e he in oduc ion, Sec ion 2p o ides a li e a-
u e e iew. Sec ion 3p esen s he me hodology, ollowed by he discussion o he policy
esponses implemen ed du ing he wo c ises in Sec ion 4. Sec ion 5ou lines he eg ession
es ima ion esul s. Sec ion 6concludes he pape .
2. Li e a u e Re iew
The EU has ocused on achie ing con e gence among i s membe s a es since he
T ea y o Rome. Al hough i has been called a “con e gence machine”, as i s membe s a es
achie ed high g ow h a es wi h he lowes le els o income inequali y (Ridao-Cano &
Bodewig,2018), he p ocess has no been homogeneous (Csaba,2025).
Since he la e 1990s, esea ch has ocused on analyzing he con e gence p ocess o
CEECs owa ds he old membe s a es, ocusing on he co e–pe iphe y di ision. Indeed,
he EU membe s a es ha e con e ged (Fo gó & Je cák,2015;Cie´slik & Wci´slik,2020;
Be na delli e al.,2021;¸Sanlı & A slan,2025). Signi ican dispa i ies emain, which led
o he c ea ion o mul iple “con e gence clubs”, highligh ing he EU’s ulne abili y o
ex e nal economic shocks (Bo o i´c e al.,2024). Despi e he Eu opean in eg a ion p ocess,
he di e gence be ween no hwes e n and sou heas e n Eu opean coun ies has become
mo e p onounced (Casag ande & Dallago,2024), while he e is no con e gence among he
co e coun ies (Šiljak,2015).
The nega i e e ec s o he ecession on he con e gence p ocess in he EU ha e been
con i med by se e al s udies (Ma elli & Signo elli,2015;S oica e al.,2019;Biscia i e al.,
2020), especially in he eu o a ea. Inadequa e en o cemen o iscal ules and weak policy
coo dina ion wi hin he eu o a ea con ibu ed o insu icien eal con e gence, as s uc u al
di e ences among membe s a es deepened, pa icula ly du ing and a e he ecession
(Schuknech e al.,2011;Dallago,2017). Con e gence emains limi ed, wi h pe sis en
di e gence pa e ns shaped by complex sys emic in e ac ions and ex e nal shocks, such as
Economies 2025,13, 214 3 o 17
he global inancial c isis and he COVID-19 pandemic (Haynes & Alemna,2023;Licche a
& Ma ozzi,2023).
Real con e gence in he EU u he de e io a ed du ing he COVID-19 pandemic,
highligh ing he EU’s ulne abili y o ex e nal shocks and he need o di e en ia ed policy
esponses (Fedaje e al.,2021) beyond mone a y policy alone (Dema y & Hü he ,2022).
I s e ec s a e also con i med in he case o EU candida e coun ies, whe e he s ag la ion
signi ican ly dis up ed con e gence dynamics (Šiljak & Nielsen,2025).
3. Me hodology
Based on he Solow g ow h model (Solow,1956), con e gence analysis was popula -
ized by Ba o and Sala-i-Ma in (1992). In hei esea ch, hey analyzed he p ocess in he
U.S. and ound a con e gence speed o 2% pe yea , ega dless o he ime pe iod. This a e
is used as a benchma k in empi ical s udies.
The e a e wo ypes o con e gence, sigma and be a (β):
•
Sigma con e gence measu es a educ ion in he dispe sion o pe capi a GDP o e ime.
•β
-con e gence, he ocus o his s udy, es s whe he poo e coun ies g ow as e han
iche ones, cap u ing he speed o con e gence.
•β-con e gence is u he di ided in o he ollowing:
•
Absolu e (uncondi ional) con e gence assumes coun ies ha e he same s uc u es
and con e ge owa d he same s eady s a e. As he EU membe s a es di e in
hei economic and ins i u ional s uc u es and le els o de elopmen , his di e si y
p o ides a key mo i a ion o es o condi ional con e gence.
•
Condi ional con e gence acknowledges s uc u al di e ences ac oss coun ies, mean-
ing con e gence s ill occu s bu owa d di e en s eady s a es.
To es
β
-con e gence, an OLS eg ession is es ima ed. In he absolu e con e gence
model, he dependen a iable is he a e age pe capi a GDP g ow h a e, and he inde-
penden (explana o y) a iable is pe capi a GDP (PPP-adjus ed) in he ini ial yea o he
analyzed pe iod, compu ed in a na u al loga i hm (Equa ion (1)). A nega i e and signi ican
β-coe icien indica es con e gence:
Υi.0,T =αi+βlog(Yi,0) + εi(1)
Condi ional con e gence is analyzed by es ima ing an augmen ed absolu e con e -
gence model. While he wo co e a iables emain he same (ini ial pe capi a GDP and pe
capi a GDP g ow h), he model is ex ended by including addi ional independen a iables.
In his esea ch, wo se s o a iables a e inco po a ed:
•
In e nal a iables—in luenced by go e nmen policy: con ol o co up ion, gene al
go e nmen deb , and unemploymen (Equa ion (2)).
•
Ex e nal a iables—la gely ou side domes ic con ol: economic openness, in la ion,
and g oss ixed capi al o ma ion (Equa ion (3)).
Υi.0,T =αi+β1log(Yi,0) + β2CCi.0,T +β4Deb i,0. T +β5Unempi,0.T +εi(2)
Υi.0,T =αi+β1log(Yi,0) + β2EOi.0,T +β3In i,0. T +β4GFCFi,0.T +εi(3)
The independen a iables included we e chosen o wo easons. Fi s , hey e lec
key a eas a ec ed by he c ises. Second, hey a e well-es ablished in he li e a u e on
economic con e gence (see Sec ion 5). This ensu es ha he models a e bo h heo e ically
g ounded and ele an o he con ex o he analysis.
The analyzed pe iod is 2004–2022. As his esea ch aims o analyze he e ec s o
he wo economic down u ns on he p ocess, he eg essions we e also es ima ed o he
Economies 2025,13, 214 4 o 17
ollowing sub-pe iods: he p e- ecession pe iod (2004–2008), he ecession pe iod (2009–
2013), he pos - ecession pe iod (2014–2019), and he s ag la ion pe iod (2020–2022).
Model diagnos ics we e pe o med o ensu e he obus ness o he eg ession esul s.
He e oskedas ici y was es ed using he B eusch-Pagan es , and mul icollinea i y was de-
e mined using he Va iance In la ion Fac o (VIF). Whe e he e oskedas ici y was de ec ed,
models we e e-es ima ed wi h obus s anda d e o s.
This esea ch ollows he classical app oach o he con e gence analysis used by
Sala-i-Ma in (1996)
and is based on c oss-sec ional da a, i.e., he eg essions a e es ima ed
using a e age alues o annual da a. While panel da a analysis is mo e common, he use o
c oss-sec ional da a is jus i ied by he ocus on economic down u ns. Islam (1995) sugges s
using panel da a o pe iods no sho e han i e yea s, and he s ag la ion pe iod in his
esea ch las ed o h ee yea s. Also, “ he c oss-sec ional da a a e ee o he dis o ions
caused by business cycles, as well as a ious demand- and supply-side andom shocks ha
de ia e he economy om he pa h owa d a s eady s a e” (Vojino i´c e al.,2009, p. 127).
Table 1p esen s he desc ip i e s a is ics o he a iables used in he es ima ion o
he con e gence models ac oss wen y-eigh coun ies, EU-27, and he UK, as i was an EU
membe s a e du ing almos all o he analyzed pe iod 2004–2022.
Table 1. Desc ip i e s a is ics (2004–2022).
Va iable Desc ip ion Mean S anda d
De ia ion Min Max
Pe capi a
GDP g ow h
Annual pe cen age g ow h a e
o GDP pe capi a 2.024123 1.448656 −0.0752 4.474886
Log (ini ial pe
capi a GDP)
Na u al loga i hm o pe
capi a GDP 10.03407 0.470701 9.103929 11.07743
Economic
openness
A sum o expo s and impo s
as a pe cen age o GDP 123.6808 65.3275 55.80998 328.348
In la ion a e By he Ha monized Index o
Consume P ices 2.532431 1.023868 1.493692 5.00654
G oss ixed
capi al o ma ion
Pe cen age o GDP 21.93394 2.931246 15.67464 28.12339
Con ol o
co up ion
On a scale om 0 o 100; he
lowe alue indica es a mo e
co up go e nmen
69.96429 15.63936 45.57895 96.31579
Gene al
go e nmen deb
Pe cen age o GDP 62.7903 33.39201 9.090226 158.78
Unemploymen
a e Pe cen age o labo o ce 8.231482 2.977089 4.978947 16.53158
Sou ce: Au ho ’s calcula ions.
The da a on pe capi a GDP g ow h, ini ial pe capi a GDP, economic openness, g oss
ixed capi al o ma ion, unemploymen , go e nmen deb , and con ol o co up ion we e
ob ained om he Wo ld Bank (2025). The da a on in la ion a es we e sou ced om he
IMF’s Wo ld Economic Ou look da abase (In e na ional Mone a y Fund,2024).
4. Unde s anding Recession and S ag la ion: A Mac oeconomic View
Economic luc ua ions di e in hei na u e. A ecession—a decline in economic ac i -
i y las ing se e al mon hs (Hall & Gelda d,2024)—is a demand-side shock cha ac e ized
by ising unemploymen and lowe in la ion, o , mos commonly, de la ion. As agg ega e
demand needs o be s imula ed o end a ecession and ini ia e an economic boom, cen al
Economies 2025,13, 214 5 o 17
banks ypically lowe in e es a es o encou age spending and in es men , which aligns
wi h Keynesian economic ecommenda ions. Recessions a e no uncommon and occu
mo e equen ly han s ag la ion, which is a mo e se e e ype o economic luc ua ion.
S ag la ion is a combina ion o ising in la ion and economic s agna ion caused by an
ad e se supply shock, such as a dec ease in he supply o a commodi y, which aises i s
p ice. Acco ding o Mankiw (2021), policymake s ace wo pain ul op ions when dealing
wi h s ag la ion:
1.
As ad e se supply shocks cause p ices o inc ease, he i s op ion is o hold agg ega e
demand cons an , which leads o a decline in ou pu , o a ecession.
2.
The second op ion is o expand agg ega e demand o p e en a educ ion in ou pu .
Howe e , his esul s in a pe manen ly highe p ice le el (Mankiw,2021). The e o e,
he e is no win-win scena io when i comes o s ag la ion.
The wo ld has expe ienced wo majo supply shocks since 2020. The i s was caused
by he COVID-19 pandemic, which dis up ed p oduc ion and global supply chains. The
second was he wa in Uk aine, which igge ed an ene gy c isis. As his in la ion was
la gely impo ed, adi ional mone a y policy ools had limi ed e ec . Cen al banks aised
in e es a es, a adi ional ool o lowe ing in la ion h ough a educ ion in demand, o
li le e ec as se e al EU membe s a es con inue o s uggle wi h high in la ion.
4.1. Ins i u ional Lea ning om he 2009 Financial C isis
In esponse o he 2008–2009 global inancial c isis and he subsequen eu o a ea
deb c isis, he EU implemen ed a se ies o e o ms designed o s eng hen i s economic
go e nance amewo k and educe sys emic ulne abili ies.
•
Eu opean S abili y Mechanism (ESM): Es ablished in 2012 as he successo o he
Eu opean Financial S abili y Facili y (EFSF), he ESM became he EU’s pe manen
c isis esolu ion body. I s s a ed mission is o “enable he coun ies o he eu o a ea
o a oid and o e come inancial c ises and o main ain long- e m inancial s abili y
and p ospe i y by p o iding loans and o he ypes o inancial assis ance” (Eu opean
S abili y Mechanism,n.d.-c). In 2020, i s manda e was ex ended o mi iga e he
consequences o he COVID-19 pandemic. Unde he e ised condi ions, “ he only
equi emen o access he c edi line was ha eu o a ea Membe S a es eques ing
suppo would commi o use ha c edi line o suppo domes ic inancing o di ec
and indi ec cos s ega ding heal hca e, cu e and p e en ion ela ed o he COVID-19
c isis” (Eu opean Commission,2020). In 2025, he o al amoun o loans dis ibu ed by
ESM/EFSF was EUR 295 billion, wi h a emaining lending capaci y o EUR 427 billion
(Eu opean S abili y Mechanism,n.d.-b).
•
Mac oeconomic Imbalance P ocedu e (MIP): Es ablished in 2011, he MIP is a su eil-
lance mechanism designed o iden i y and moni o he mos ele an dimensions
o mac oeconomic imbalances and compe i i eness losses. These include ex e nal
imbalances and compe i i eness, in e nal imbalances, and employmen (Eu os a ,
n.d.). The mechanism applies o bo h indi idual membe s a es and he EU as a whole.
When signi ican imbalances a e iden i ied, a ec ed coun ies may ecei e coun y-
speci ic ecommenda ions aimed a add essing s uc u al weaknesses. Thei policy
commi men s a e subsequen ly acked h ough enhanced moni o ing and egula
epo ing p ocedu es (Eu opean Commission,n.d.-a).
•
Banking Union: Es ablished in 2014 as a esponse o he 2008 inancial c isis and he
subsequen eu o a ea deb c isis, he EU Banking Union aims “ o p o ide o a new
and be e in eg a ed Eu opean a chi ec u e o banking supe ision and esolu ion
. . .
h ough s eng hening he sa e y and soundness o Eu ope’s banks o make hem
mo e esilien and enhance con idence in he inancial sys em
. . .
buil on p e-exis ing
Economies 2025,13, 214 6 o 17
banking egula o y amewo k”. The ecession showed he deep in e connec ions
wi hin he eu o a ea banking sec o and he impac o he spill-o e e ec s on he
inancial s abili y o he en i e egion. The Union cu en ly comp ises 21 s a es (20
membe s o he eu o a ea and Bulga ia) (Eu opean Council,n.d.).
4.2. Mone a y and Fiscal Policy in he Eu o A ea C isis
Mone a y and iscal policies a e classical ools used o mi iga e he nega i e conse-
quences o economic down u ns. Howe e , he si ua ion in he EU is complica ed, as
mos membe s a es (cu en ly 20) a e pa o he eu o a ea and sha e a common mone a y
policy managed by he ECB. On he o he hand, he EU is no a poli ical union, and iscal
policy emains decen alized, managed by indi idual membe s a es. Du ing he ecession,
membe s a es ha we e pa o bailou p og ams had o implemen aus e i y measu es,
while he ECB pu sued an expansiona y mone a y policy. The e o e, he wo policies
we e misma ched.
By 2025, he ECB had cu in e es a es se en imes (Canepa & Ko anyi,2025). This is
a ypical p o-Keynesian esponse du ing a c isis, i.e., lowe ing in e es a es o s imula e
demand. The ECB also p o ided liquidi y h ough Ta ge ed Long-Te m Re inancing Ope a-
ions (TLTROs). Fi s launched in 2014, hese ope a ions o e inancing o c edi ins i u ions
on a o able condi ions o s imula e lending o he eal economy (Eu opean Cen al Bank,
n.d.-b). Ano he p og am, he Secu i ies Ma ke s P og amme (SMP), announced in May
2010, in ol ed he pu chase o deb secu i ies by he Eu osys em om i s coun e pa s
o es o e he p ope unc ioning o he mone a y policy ansmission mechanism, bu
i did no al e he money supply (Eu opean Cen al Bank,2010, p. 24). The p og am
was eplaced by Ou igh Mone a y T ansac ions (OMTs) in 2012. Designed o main ain
he in eg i y o he eu o a ea, OMTs in ol e po en ially unlimi ed pu chases o so e eign
bonds on he seconda y ma ke by he ECB (Eu opean Cen al Bank,2012). Bo h he SMP
and OMT announcemen s signi ican ly educed bond yields in c isis-hi coun ies and
li ed agg ega e Eu opean s ock indices, whe eas he announcemen o TLTROs had weake
e ec s (Mody & Nedeljko ic,2024).
In con as o he ECB’s expansiona y mone a y s ance, iscal policy in he EU du ing
he ecession was domina ed by aus e i y, pa icula ly in membe s a es such as G eece, I e-
land, Po ugal, and Spain, which we e subjec o bailou p og ams inanced by he “T oika”
( he IMF, he Eu opean Commission (EC), and he ECB). These p og ams equi ed coun ies
o su ende subs an ial elemen s o economic so e eign y in exchange o inancial aid
(S igli z,2016, p. 17). While hese s a es al eady aced ising go e nmen deb and de ici s,
he ea o con agion wi hin he eu o a ea u he jus i ied in e en ion. The p og ams
imposed aus e i y measu es, which included spending cu s and ax inc eases, despi e he
ac ha , in line wi h Keynesian economics, such an app oach is coun e p oduc i e du ing
a ecession. Keynes ad oca ed o inc eased go e nmen spending and highe public deb
du ing ecessions o s imula e agg ega e demand, inanced h ough bo owing. Once he
economy had s abilized, he deb would be epaid. As he cen al a chi ec o he B e on
Woods sys em, he la e became he subjec o S igli z’s ema k: “Keynes would be olling
o e in his g a e we e he o see wha has happened o his child” (S igli z,2002, p. 13)
( e e ing o he IMF). Ul ima ely, aus e i y measu es wo sened he ecession and delayed
he egion’s economic eco e y (Guaja do e al.,2014). The e o e, he misma ch be ween
he ECB’s expansiona y mone a y policy and he es ic i e iscal policies adop ed by many
membe s a es con ibu ed o he p olonged du a ion o he eu ozone c isis. Fiscally con-
s ained coun ies we e hi ha des by he c isis and we e unable o ully bene i om he
g ow h-suppo ing mone a y condi ions. As a esul , hese s a es expe ienced signi ican
delays in hei economic eco e y.
Economies 2025,13, 214 7 o 17
4.3. Ins i u ional Responses o he COVID-19 and S ag la ion C isis
The c isis igge ed by he COVID-19 pandemic and he wa in Uk aine exhibi ed
“s ag la iona y” cha ac e is ics. D i en by supply-side shocks, i was cha ac e ized by high
in la ion and s agna ion. Consequen ly, he policy measu es e ec i e du ing he ecession
p o ed less applicable, equi ing a di e en se o ools and ins i u ional esponses. The EU
esponded swi ly a he sup ana ional le el, oge he wi h indi idual policies o membe
s a es, and i launched se e al packages o mi iga e mone a y and iscal consequences.
•
Pandemic Eme gency Pu chase P og amme (PEPP): Ini ia ed in Ma ch 2020 and
discon inued in Decembe 2024, PEPP was an ECB mone a y measu e o “coun e
he se ious isks o he mone a y policy ansmission mechanism and he ou look
o he eu o a ea posed by he co ona i us (COVID-19) ou b eak”. I was a em-
po a y asse pu chase p og am co e ing p i a e and public sec o secu i ies, ini-
ially wo h EUR 750 billion and o aling EUR 1850 billion by Decembe 2020
(Eu opean Cen al Bank,n.d.-a).
•
Nex Gene a ionEU (NGEU): In esponse o he COVID-19 pandemic, he EC c ea ed
NGEU, a empo a y eco e y ins umen . Th ough a combina ion o loans and g an s
o membe s a es, as well as cen ally managed EU p og ams, he EC was au ho ized
o bo ow up o EUR 806.9 billion by 2026 (Eu opean Commission,2022). O his
o al, 90% (o EUR 723.9 billion) will und he Reco e y and Resilience Facili y (RRF).
Es ablished in 2021, he RRF is a empo a y ins umen ha o e s bo h g an s and
loans o suppo e o ms and in es men s in membe s a es, pa icula ly in he a eas
o g een and digi al ansi ions (Ibid). The RRF is also c ucial o he implemen a ion o
he REPowe EU plan, he EC’s esponse o mi iga e he ene gy and socio-economic
consequences o Russia’s in asion o Uk aine (Eu opean Commission,n.d.-b).
•
Suppo o mi iga e Unemploymen Risks in an Eme gency (SURE): In oduced
in 2020 and ac i e un il Decembe 2022, SURE was designed o p o ide inancial
assis ance o membe s a es in suppo o sho - ime wo k schemes. The ins umen
enabled go e nmen s o main ain employmen by keeping wo ke s o mally a ached
o hei employe s as ull- ime wo ke s, e en when only pa - ime wo k was a ailable
(Yueh,2023, p. 146). SURE o e ed up o EUR 100 billion in loans on a o able
e ms, helping o p ese e employmen du ing he COVID-19 pandemic (Eu opean
Commission,n.d.-c).
•
ESM Pandemic C isis Suppo C edi Line: The ESM c ea ed a sa e y ne o
so e eigns in he o m o he Pandemic C isis Suppo ins umen , amoun ing o
EUR 240 billion (Re ol ella e al.,2020), which became ope a ional in May 2020. Pan-
demic C isis Suppo was a c edi line designed o suppo inancing o heal hca e
cos s ela ed o he COVID-19 c isis. The ESM could p o ide loans amoun ing o 2%
o a coun y’s GDP a e y low in e es a es. No EU membe s applied o he acili y
(Eu opean S abili y Mechanism,n.d.-a).
•
Pan-Eu opean Gua an ee Fund (EGF): The hi d sa e y ne was es ablished by he
Eu opean In es men Bank and o e ed up o EUR 200 billion in suppo o EU-
based companies. I s aim was o help he COVID-19 pandemic-a ec ed businesses by
ensu ing hey would ha e su icien sho - e m liquidi y a ailable o wea he he c isis
and ha hey we e able o con inue hei g ow h and de elopmen in he medium o
long e m (Eu opean In es men Fund,n.d.). The h ee sa e y ne s o aled EUR 540
billion (Eu opean Cen al Bank,n.d.-a).
Nex o he sa e y ne s, Ge man Chancello Angela Me kel and F ench P esiden
Emmanuel Mac on ini ially p oposed a EUR 500 billion Eu opean Fiscal Response, which
was inc eased o EUR 750 billion by he EC. I consis ed o EUR 390 billion in g an s and
EUR 360 billion in loans (Janse & Tsano a,2020).
Economies 2025,13, 214 8 o 17
To con ain in la ion ollowing he COVID-19 pandemic and he wa in Uk aine, he
EU implemen ed a combined app oach o es ic i e mone a y policy by he ECB and iscal
in e en ions a he na ional le el. In July 2022, he ECB discon inued ne asse pu chases
unde he Asse Pu chase P og amme and began aising in e es a es (Blo e al.,2023).
In Sep embe 2022, he Go e ning Council decided o aise he h ee key ECB in e es
a es by 75 basis poin s, which inc eased o 400 basis poin s by Sep embe 2023 (Eu opean
Cen al Bank,n.d.-a). The in e es a e inc ease is a classic ool a cen al bank applies o
lowe in la ion and dec ease demand. Howe e , in his case, i was ine ec i e in slowing
in la ion, as he in la ion was impo ed, no demand-d i en (Blo e al.,2023, p. 8).
In pa allel, a wide ange o iscal measu es we e adop ed a he na ional le el o
mi iga e he economic and social impac o he pandemic. These included cu s in ax
bases and a es, ax elie s, exemp ions, de e als, and o he suppo i e mechanisms aimed
a p o iding immedia e elie , suppo ing economic eco e y, and ensu ing s abili y o
businesses and indi iduals du ing challenging imes (Eu opean Pa liamen ,2023, p. 42).
The ax-bene i sys ems abso bed a signi ican sha e o he COVID-19 shock and we e able
o o se —in mos coun ies— he eg essi e na u e o he shock on ma ke incomes (Ch is l
e al.,2021, p. 17).
The EU’s iscal esponse o he COVID-19 pandemic amoun ed o app oxima ely
EUR 1.29 illion, while he combined mone a y and iscal esponse o aled EUR 2.64
illion. These ools e lec ed s onge ins i u ional coo dina ion, showing ha he EU
did lea n om pas expe iences. The EU’s COVID-19 esponse demons a ed imp o ed
c isis managemen capaci y bu limi ed ea ly poli ical ecogni ion and public engagemen ,
highligh ing ins i u ional cons ain s a he han p og ess owa d deepe in eg a ion (Boin
& Rhina d,2022, p. 15). Howe e , he wo c ises di e ed in hei s uc u es: while he
EU was ins i u ionally be e p epa ed in 2020–2022, he na u e o he c isis ul ima ely
cons ained he e ec i eness o i s esponse. Table 2summa izes he key ea u es and
policy esponses o he wo c ises discussed abo e, highligh ing he ins i u ional e olu ion
in he EU’s app oach o economic shocks.
Table 2. Summa y o c isis pe iods and policy ools.
Pe iod C isis Type Key Fea u es Main Policy Tools (Mone a y
and Fiscal)
EU Ins i u ional
Response
2009–2013 Recession Demand-side shock,
de la ion ECB in e es a e cu s, aus e i y ESM, MIP, Banking
Union
2020–2022 S ag la ion Supply-side shock,
in la ion ECB PEPP, na ional subsidies NGEU, SURE,
REPowe EU
The ollowing sec ion analyzes how he wo c ises impac ed he absolu e and condi-
ional con e gence p ocesses wi hin he EU.
5. Resul s
This sec ion analyzes he EU con e gence be ween 2004 and 2022, emphasizing he
e ec s o he wo economic down u ns on he p ocess. Table 3p esen s he esul s o he
eg ession analysis o he ull pe iod and ou sub-pe iods: p e-c isis (2004–2008), c isis
(2009–2013), eco e y (2014–2019), and s ag la ion (2020–2022).
The eg ession esul s show ha absolu e con e gence occu ed in he EU o e he
en i e analyzed pe iod, as well as du ing pe iods o economic s abili y, bu no du ing he
wo majo economic down u ns. Be ween 2004 and 2022, he
β
-coe icien was nega i e a
−
2.27 and s a is ically signi ican (p- alue = 0.000), indica ing a con e gence speed o 2.27%
pe yea , consis en wi h he Ba o and Sala-i-Ma in benchma k. Du ing his pe iod, he
Economies 2025,13, 214 15 o 17
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