As illustrated by the worst-case scenarios, in the current difficult situation, the risk of a fragmented response to the pandemic could prove extremely costly. In the case of a severe economic shock, one advantage of an ambitious common action is that it allows for a relatively less severe shock and a faster recovery to the initial potential added value growth path. A third advantage of common action is that it also ensures a higher level of protection against negative medium-term second round effects. Moving away from sterile dependency or isolationist postures, more common and concerted strategic actions at EU level are needed. In this scenario, we envisage that such a response is given and that an ambitious level of common legislative and economic action is rapidly agreed upon and implemented. The selection of policy areas considered in this exercise builds upon European Commission proposals to date and upon a series of studies by EAVA that have extensively analysed and quantified the potential added value benefits of more common action in more than fifty policy areas.
In this scenario, the first initial shock is again identical to the worst-case scenario. The impact of the simulated shock on potential added value and on its components is represented in Figure 5 below. We observe that, compared to the worst-case scenario, the policies related to ensuring a crisis-proof EMU significantly reduce the impact of the shock at the beginning of the simulation horizon. This was expected, as the positive effects of common action in this policy area materialise precisely during a crisis. Measures in the other policy areas also have a sizeable positive effect, although a more limited one in the short-term as the impact of these non-EMU related measures occurs progressively over the entire horizon period.