The social contract in Europe after the pandemic, will the pendulum swing back?

Abstract

The massive government spending during the Covid-19 crisis to cushion the blow for people and businesses marks a revival of the social contract—and a reversal of the trend of institutional pullback over the past 20 years which left individuals increasingly responsible for their own economic outcomes in their roles as workers, consumers, and savers. But the large-scale fiscal stimulus and other buffering measures may not be sustainable in the long term. How will the institutional relationship between governments, businesses, and individuals evolve as we come out of this crisis? How can we ensure that some of the positive benefits that the emergency intervention has had on individuals’ economic outcomes be sustained in the future?