The COVID-19 pandemic has plunged the European Union into the most severe recession in its recent history, exacerbating existing imbalances and divergences between members. The health emergency has hit the Southern Periphery region (comprising Greece, Italy, Portugal and Spain) particularly hard, compounding its existing struggles with stagnant growth, high debt levels and competitiveness flaws. Although some recovery is forecast for 2021, the social, political and economic consequences of the pandemic will be long lasting.

 The quality of governance in different EU countries affected their resilience to the initial COVID-19 shock and will be key for the success of the EU-directed policy responses. Structural reforms to improve economic efficiency and boost institutional effectiveness will be essential to ensure durable growth (and access to EU funds). But they remain unpopular domestically.

 Shortages of medical and pharmaceutical products have provided a perfect business opportunity for organised-crime groups in the EU, with a surge in the production and commercialisation of counterfeit and substandard high-demand medical goods, including vaccines. Better enforcement and awareness campaigns will be needed to address this issue.

 After some initial hesitancy, the EU adopted a comprehensive and multifaceted strategy to tackle the pandemic, supported by an unparalleled mobilisation of regional resources. The strategy is aimed at boosting the immediate recovery while driving a longer-term transformation towards more resilient, sustainable and inclusive economic models.  

 The EU response featured several novel elements, such as the ‘mutualisation’ of debt – a victory for the Southern Periphery states against the ‘frugal four’ (Austria, Denmark, Netherlands and Sweden) – and the conditionality of the disbursement of EU funds on respect for the rule of law.

 The pandemic threatens to accentuate existing trends of political fragmentation and popular dissatisfaction with the status quo, increasing the risk of political instability. 

 The effectiveness of the EU-supported recovery and structural transformation of regional economies will be an inflection point for the durability and resilience of the EU project.