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Europe's consumer economies may never return to their pre-pandemic "normal", a Working Paper published by the ECB Thursday argues. Alongside cheap credit and geographical reallocation, durable changes in consumer preferences and savings behaviour may act as a third driver behind so-called 'zombification' of firms and business, the study found, while the introduction of such health policies as vaccine roll-outs or health passes may not be enough for pre-pandemic consumption patterns to be restored.

Governments should regard the Covid-19 not only as a liquidity shock, the authors conclude, but as one in which broad-based policies aimed at restoring non-durable consumption such as VAT cuts are unlikely to be effective. Controlling infection risk should be seen as a vital to preserving economic prosperity, with pessimistic macroeconomic expectations and psychological factors such as fears about the future playing a significant role in determining households' consumption.