Post–COVID-19 Europe: Three Scenarios

It is sometimes quipped that Europe is built on crises. And, yes, the COVID-19 pandemic, following on the heels of Brexit, proved powerful enough to break the taboo on the creation of a long overdue pan-European fiscal policy.
This is in line with our prediction that when faced with severe crisis, the EU would take bold steps towards establishing a common bond to finance a fiscal expansion at the center. Our other prediction — that a safe asset would be created that eurozone banks could invest in, in lieu of risky national sovereign bonds, to reduce the economy’s sensitivity to adverse macroeconomic shocks — has not come true. It may still happen, but perhaps only after another major crisis.