A key question: How high will the level of the euro zone’s potential GDP be in 2021?

How much will the euro zone grow in 2021 after an almost 8% fall in GDP in 2020? To answer this question, we must first ask another question: how high will the level of potential GDP be in the euro zone in 2021? Relative to the pre- COVID crisis trend , the euro zone’s potential GDP may be reduced by: Company bankruptcies and a fall in investment, which reduce capital; A loss of labour productivity due to the new health regulations, and which may be significant in a number of economic sectors. In what looks like a reasonable scenario, this loss of potential GDP seems to suggest that the most the euro zone could grow in 2021 is 4.3%.