What are the 4 drivers that will make the US economic recovery faster than that of Europe?

America is recovering faster of the economic impact caused by the coronavirus pandemic than the countries of the European Union (EU).

The large number of fiscal stimulus in the United States, it has been a critical factor in ensuring that the world’s largest economy resurfaces quickly. But there are other reasons that allow US returns to pre-crisis exit levels much faster than their EU counterparts.

Silvia Dall’Angelo, Senior Economist at Federated Hermes, said CNBC in March there is a “Institutional problem” in the European Union as one of the main obstacles to its recovery. As such, he said, “there are signs that the United States will recover much faster than the EU.”

According to the International Monetary Fund, the United States is well positioned not only to return to its pre-pandemic growth rate, but to exceed it this year.

Although European countries surprised financial markets in July 2020, by meeting and approving a plan to fiscal stimulus for the whole of the EU which included borrowings of 750 billion euros (892 billion dollars) on the public markets, this the money is not yet available for the 27 Member States.

It takes a number of legislative approvals before the European Commission, the EU’s executive arm, can access markets. This is expected to happen this summer, but the Constitutional Court of Germany brought more uncertainty process last week by halting program approval, which could ultimately further delay disbursements.

On the contrary, the President of the United States, Joe Biden, got $ 1.9 trillion budget stimulus passed after less than two months in office.

Growth expectations

According to Monetary Fund International, the United States is well positioned not only to return, but also to surpass your prepandemic growth rate this year. But that’s another story in the euro area, made up of the 19 countries that share the single currency.

One of the main differences between the United States and the bloc is that the Last year’s economic setback was much bigger in the eurozone. While the US economy contracted by 3.5%, the euro area economy contracted almost twice.

The latest vaccination data shows that around 50% of the US population has received at least one dose of the Covid-19 vaccine, compared to just 20% of the EU population.

Dado lo profundo que fue el impacto para ellos el año pasado, las naciones del euro naturally tendrán más dificultades para recuperarse in 2021. Se prevé that su producto interno bruto (GDP) will expandirá a 4.4% este año, mientras que se espera he US growth reaches 6.4%.

Vaccines

Zsolt Darvas, member of the Bruegel expert group, based in Brussels, underlined CNBC that the progress of Vaccination against COVID-19 was “much stronger” in the United States than in Europe and therefore the US economy is likely to reopen completely sooner than in Europe. .

The latest immunization data show that the total number of doses administered per 100 people in their respective populations is much higher in the US than in the EU. Currently, the proportion of the total United States population that has received at least a vaccine dose is greater than 30 percent.

Savings rate

Many people in developed countries have reached save more since the pandemic appeared compared to previous years. This is partly due to the government’s stimulus measures, but also because consumer spending has been severely constrained, with non-essential retail, leisure activities and travel banned for months.

At the end of the third quarter of 2020, the average personal savings rate in the United States stood at 15.7%. This was lower than a peak of 25.8% at the height of the pandemic, but still a lot higher than the average savings rate before 2020.

At the same time, the household savings rate in the euro zone was also very high: it stood at 17.3% at the end of September, according to Eurostat. This level of savings was lower than the 2020 peak, but it was also much higher compared to pre-pandemic levels.

But Federated Hermes’ Dall’Angelo warned that the faster vaccine implementation in the United States will allow consumers spend your extra money before, with which they will take a new advantage over Europeans despite the higher savings rate of the latter.

Unemployment is expected to improve faster in the United States than in the euro area, despite similar unemployment levels last year

“The safe reopening of the economy is therefore a prerequisite for releasing pent-up demand and a possible reversal of preventive savings. In this sense, the United States is in a much stronger position than the euro area, “said the analyst. CNBC.

While it remains uncertain how, if at all, people will choose to spend their additional savings, “in general, savings rates tend to be structurally higher in the euro area than in the United States. which means that the the scale of a consumption boom is more limited in the euro area compared to the United States, ”added Dall’Angelo.

Unemployment

The United States and the European Union have been very keen to avoid layoffs. This resulted in wage subsidies, unemployment benefits and other supportive measures.

As a result, the unemployment has been containedor something like that, and in both regions the unemployment rate remained below its peak during the 2008 global financial crisis.

However, it is expected that the the number of unemployed improves faster in the United States than in the euro area, although they experienced similar levels of unemployment last year. Unemployment is expected drops to 5.8% this year in the United States, While in the euro zone, it will increase slightly to 8.7% against 7.9% in 2020.

Experts fear that as European governments lift their recent labor market policies, companies could become insolvent and more workers are at risk of becoming unemployed.

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