The 2020–21 COVID Pandemic

Abstract

Abstract This chapter explores how the 2020–21 COVID-19 Pandemic posed a threat to European integration as severe as the 2010–14 Debt Crisis but failed to produce nearly as substantial financial regulatory reforms due to its origin outside of the financial sector. It traces how the anticipated surge of nonperforming loans out of the economic contraction from lockdown measures risked a wave of bank failures and sovereign defaults. However, because flaws in financial regulation had not caused the Pandemic, financial reform could not prevent another similar shock. This created a willingness to embrace large temporary programs such as NextGenerationEU and the Pandemic Emergency Purchase Program, but not to support permanent reforms such as a European Deposit Insurance Scheme or Capital Markets Union. Instead, the only notable permanent financial reform out of the Pandemic was establishing the European Stability Mechanism as a backstop to the Single Resolution Fund to manage future bank failures.