Euro zone: Why is the GDP lost in a recession never recovered?
The example of the 2008-2009 recession shows that in the euro zone, the GDP lost in a recession is never recovered: the level of GDP remains permanently lower. This will probably also apply to the coronavirus crisis. What accounts for this irreversible loss of GDP after a recession? On the supply side, the fact that the capital that has not been accumulated during the recession, or that has been lost because of bankruptcies, is not accumulated later, as companies are unable to invest enough for this catching-up to take place; also, the permanent loss of human capital that reduces labour productivity; On the demand side, the fact that the consumption that has not taken place during the recession does not take place later; that the recovery in employment is a very slow process; and that higher debt ratios can permanently reduce demand.