Europe and the centre right simply can’t afford to get this recovery wrong. The challenge is to develop a policy approach which balances the unprecedented economic circumstances arising from the pandemic with the societal demand for more inclusive growth. Only in blending these challenges into a “Middle Way’ can the centre right hope to lead the economy recovery.

This Policy Brief proposes four steps. (1) The unlocking of consumer spending and business investment to drive an initial economic expansion aided by tapering pandemic supports. Growth must become the immediate tool for tackling (and capping) pandemic related debt. (2) A back to basics set of priorities facilitating employment creation, affordable housing and the provision of essential public services. A ‘back to basics’ approach is necessary as it is the only way to deliver the payoffs needed to maintain support across a broad swathe of the middle classes. (3) A renewed commitment to reducing public debt and controlling inflation. Prolonged high inflation erodes purchasing power, particularly for those on fixed incomes or with savings. The optimal strategy for debt reduction is to keep debt levels steady initially, but then focus on slowly reducing it over time. Repairing public finances remains a marathon, not a sprint. (4) The centre right must play the long-term game because institutional reform (at both EU and national level) is about generational change, not soundbites. The European Recovery Fund is a long-term investment tool for achieving structural change, not a short-term mechanism for fiscal expansion. Europe’s fiscal rules also require a more easily understood framework. The ownership of these redesigned rules should rest with member states through a more decentralised Eurozone.