Founder Editor in Chief: Octavian-Dragomir Jora ISSN (print) 2537 - 2610
ISSN (online) 2558 - 8206
Contact Editorial Team PATRON The Idea
The 2008 and 2020 Global Crises – Differences and Similarities

The 2008 and 2020 Global Crises – Differences and Similarities Economy Near Us (XXXIII)

The years 2008 and 2020 saw two global crises with important similarities, which evoked numerous comparisons. I shall briefly sketch differences and similarities between these two global crises and the European Union response. This comparison will help us understand how European Union’s institutions are learning and adapting their reaction to the volatile environment. 

How it started 

The 2008 Global Financial Crisis 

It started, in 2007, with the housing market effervesce which, in a vicious circle with interest rates and securitization, made mortgages very accessible and lowered prudential standards, enabling the population to take out loans that they could not otherwise afford. Following a period of deregulation of financial markets, the lenders were able to create a new financial instrument called mortgage-backed securities (loans stitched together into portfolios which, when sliced and distributed, were supposed to minimize the risk of the individual, often opaque components). Banks and other non-banking financial institutions could trade mortgages and all the risk involved off of their balance sheets, enabling overleveraging by minimizing collateral requirements. As the subprime market foundered, with a large percentage of underlying debt moving into default, banking institutions began to face financial difficulties. The housing market was the first to fall. The stock market, in response, began to sink, affecting the economic environment worldwide. Otherwise healthy companies and institutions were brought to their knees overnight, as capital requirements soared for hitherto safe products. Others were wiped out completely. The real economy soon followed. The consequences were dramatic widespread layoffs and extended periods of unemployment all over the world, lack of credit availability and failing confidence in financial stability. The impact on investments and international trade was huge, strongly decelerating the economic growth.

The crisis may have started in USA, but very quickly became global, affecting most of the countries worldwide. In the EU, the crisis was caused by a sudden stop of foreign capital into countries that had substantial deficits and were dependent on foreign lending. The crisis was worsened by the inability of states to resort to devaluation (reductions in the value of the national currency). Thus, the most affected countries within European Union, were those with a greater need for investments. The financial and economic crisis affected the EU real economy in 2008, with GDP per capita contracting by 4.8% in 2009 (compared to 2008). 

The 2020 real global economic crisis

It started in the end of 2019, in China, as a health crisis affecting all the countries around the world. The health crisis and the measures states adopted to mitigate it precipitated a huge and ongoing economic crisis. Countries worldwide entered into an economic recession. There are different opinions regarding how soon the global economic environment will recover.

For most EU Member States, the second quarter of 2020 was marked by the Great Blockade as a measure to stop the spread of the coronavirus pandemic. GDP declined by 12.1% in the Eurozone and by 11.9% in the European Union (Eurostat). Furthermore, the ECB considers that the EU GDP will decline in 2020 by 8.7%. However, unlike the 2008 crisis, the recovery is expected to be much faster, with a GDP growth rate in the Eurozone of 5.2%.  

The European Union Response 

2008: Global financial Crisis 

The EU response to the 2008 crisis targeted the following areas of intervention:

  1. Monetary policy
  2. ECB lowered its main policy interest rate, the rate on the main refinancing operations, and ensured the smooth functioning of the euro area interbank market to support the flow of credit to households and enterprises (enhanced credit support);
  3. Member State governments approved measures to reduce the effects of the financial crisis on the rest of the economy (increasing depositor insurance ceilings, guarantees for bank liabilities and bank recapitalizations);
  4. Fiscal policy
  5. reduction in tax receipts and the rise in government welfare payments as economic activity declined;
  6. additional public investment, tax relief and subsidies for part-time employment;
  7. For the whole euro area, however, the European Commission estimates the stimulus measures to amount to 1 percent of GDP over the years 2009- 2010.

III. Regulations

  1. Prudential regulation and supervision mechanisms;
  2. Creating financial buffers in period of economic growth to be able to implement countercyclical fiscal policies during shocks. 

The 2020 real global economic crisis 

On 21 July 2020, EU leaders agreed on a comprehensive package of €1,824.3 billion which combines the multiannual financial framework (MFF) and an extraordinary recovery effort, Next Generation EU (NGEU). The aim of this financial effort is summarized by Charles Michel, President of the European Council: “The package will help the EU to rebuild after the COVID-19 pandemic and will support investment in the green and digital transitions. The goals of our recovery can be summarized in three words: first convergence, second resilience and transformation. Concretely, this means: repairing the damage caused by COVID-19, reforming our economies, remodeling our societies”.

These elements are in addition to the three safety nets of €540 billion already put in place by the EU to support workers, businesses and countries 


The European Union proved that it can learn from its past. If the response to the 2008 crisis was a reluctant and slow one, in 2020 the institutional response was a quick one, despite unavoidable contradictions. Even the legendary precaution of the Nordic states was defeated

In both crises, the EU response consisted of: financial stimulus and regulatory framework enhancement. However, the differences between 2008 and 2020 reside in the size of the stimulus package and the depth of the regulatory changes. In 2008, the EU response was mostly an institutional one with new precautionary rules and mechanisms aiming to enhance the financial stability of the Member States. Moreover, the financial stimulus was considerably lower than in 2020. In 2020, the EU response consists of an unprecedent financial stimulus of €1,824.3 billion. The mechanism of excessive budgetary deficit was suspended, and generous state aid schemes for companies and unemployment were approved. All this effort was in the name of the rapid recovery and restructuring of the European Union economy.

The future will say if the great amount of money injected in the Member State economies will be the key for a successful and rapid recovery.


Photo credit:



The Market For Ideas Association

The Romanian-American Foundation for the Promotion of Education and Culture (RAFPEC)

Amfiteatru Economic