Economic resilience in EU Mediterranean states and the recovery and resilience facility

Abstract

This dissertation starts with an introduction to the COVID-19 pandemic and the economic impacts it brought with on countries of the European Union. Furthermore, the notions of economic resilience will be introduced and identify makes and economy resilient. Further focus is put on economic resilience of small states, according to Briguglio et al (2006), which states that an economy is resilient when a country has good governance, social development, macroeconomic stability, microeconomic market efficiency and good environmental management. These are considered as variables of economic resilience and several indicators will be identified in relation to each variable. This dissertation aims to analyse the level of economic resilience found in EU Mediterranean states during the pandemic and their resilience in mitigating the negative impacts left by the COVID-19 pandemic. Another section of this dissertation targets directly the Recovery and Resilience Facility, which is an EU instruments aimed at aiding Member States to recover from the pandemic. The aim of this section is to conclude whether the national recovery plans are contributing to achieving economic resilience in EU Member States. The research design used for this dissertation is that of a comparative case study between Malta and Cyprus. The aim of this case study is to highlight differences, between economically similar countries, in their way of achieving economic resilience and the differences between their RRPs and their resilience during the pandemic. For the first research question, which targets the economic resilience of Mediterranean EU states during the pandemic, a quantitative research method was used. In this analysis, statistics from Eurostat, OECD and World Bank were used in order to identify the level Malta and Cyprus are on for each indicator of economic resilience. The quantitative analysis of this research question led to the conclusion that both countries entered the pandemic on a different footing and with a different economic situation, therefore, each country had different targets and focuses during the pandemic. Both countries were resilient to a certain extent and managed to mitigate large discrepancies between prepandemic and post-pandemic statistics. Therefore, it could be concluded that whilst Malta and Cyprus were both resilient during the pandemic improvements are still necessary especially in tackling pre-pandemic issues. Malta’s pre-pandemic issue lies its grey listing by the FATF, therefore the control of corruption, money laundering and government effectiveness were quite important issues to focus on. On the other hand, Cyprus’s pre-pandemic issue concerns its gross government debt. After the EA crisis in 2008/9, Cyprus has been suffering from high government debt which resulted in a higher debt for the year 2021 after the height of the COVID-19 pandemic. Additionally, a qualitative research method was used to tackle the second research question, which focuses on whether the RRPs are contributing to economic resilience. For this research question, the original national recovery plans were summarised to provide its main targets and analysis was carried on the plans and whether weaknesses identified from the previous research question were addressed through the RRPs. Both Cyprus’s and Malta’s RRPs commonly targeted the areas of digitalisation, climate neutrality, promotion of zero-emission vehicles, social improvements, educational quality and the resilience of healthcare systems. The resilience of healthcare systems was important to be addressed taking in consideration the nature of the crisis. Reforms and investments are also important in this area to increase the level of preparedness of the system. Specific sections in the RRP targeted the pre-pandemic issues with Malta targeting the strengthening of its institutional framework and Cyprus targeting the stability of its banking and financial sectors. In addition to this, as discussed above various other sectors were targeted which experienced a negative hit during the pandemic. Therefore, this dissertation concluded that both Malta and Cyprus were, to a certain extent, resilient in fighting against the impacts of the COVID-19 pandemic whilst identifying their weaknesses in order to be addressed in the RRPs. Additionally, after assessment of the national recovery plans, it was concluded that the RRPs managed to address the weaknesses identified, therefore it could be stated that the RRPs do contribute to economic resilience.