The coronavirus disease (COVID-19) pandemic is exacting a severe social and economic toll on Europe. By mid-October 2020, more than 240,000 people have lost their lives in Europe, while nearly 7 million people are estimated to have been infected with the virus. Early spring lockdowns, voluntary social distancing, and associated disruptions in supply chains and lower demand led to a record collapse in economic activity. Real GDP fell by about 40 percent in the second quarter of 2020 (annualized quarter-over-quarter), with deeper contraction in advanced Europe, where the virus spread first, relative to emerging Europe.
 
The pandemic’s toll on Europe could have been much larger without the unprecedentedly strong and multifaceted response to the crisis. Across Europe, governments deployed large fiscal packages to support households and firms, with job retention programs preserving at least 54 million jobs. Central banks embarked on substantial monetary easing through both conventional and unconventional means, to support the flow of credit and prevent financial market disruptions. Macroprudential measures were also eased to cushion the impact of the crisis on both banks and borrowers. The European Union relaxed existing rules to accommodate increasing fiscal deficits and support to households and firms. In a strong display of solidarity, it is also mobilizing supranational resources to finance new anti-pandemic facilities and complement national fiscal policies.