MNI BRIEF: EU Commission Warn On Economy Scarring Risk

The European Commission warn Wednesday that "significant uncertainty" shrouds the long-term impact of Covid-19 on the EU's potential output, with risks of economic scarring. In paper presented ahead of Friday's Eurogroup meeting of finance ministers, the EC also warn that "widening income differences" arising from the crisis could "penalise growth and aggregate productivity throughout the recovery".

The EU's policy response "will have to continue changing as economic activity gradually returns to its pre-crisis level", the Commission states. Once again, they say economic support should not be withdrawn too early, noting that policy intervention "will need to shift from macro-economic stabilization to supporting and strengthening the recovery."

In that respect, EC notes, the acceleration of the digital and green transitions "could bring long-lasting positive effects."