Scene setter: the value of unity@25

This chapter describes how the euro area managed to withstand the major economic shocks that occurred over the four years between the outbreak of the COVID-19 pandemic and the 25th anniversary of the euro in 2024. The shocks were common to the whole euro area and major in scale, but with very asymmetric effects that had the potential to undermine the process of economic convergence. An analysis of the key macroeconomic variables in this chapter reveals a picture of resilience: little evidence of scarring in labour markets, anchored inflation expectations, no financial fragmentation and economic reconvergence as the shocks dissipated, particularly in terms of inflation. This resilience appears to be the product of past reforms and lessons learnt from experience, which enabled an unprecedented policy response both at euro area/EU level and at Member State level. These reforms and policies are examined in more detail in subsequent chapters. The chapter closes with a look at past enlargements of the euro area and their benefits, arguing that further enlargement would contribute to expand both the euro’s outreach and the international use of the currency