The pandemic-induced lockdowns are widely expected to throw Europe into a deep crisis. Will Luxembourg's economy also be pushed to the brink?

The so-called RECOVid group consists of 27 international economists who work for the University of Luxembourg, national statistics service Statec and the Liser research centre.

The panel of experts analysed the potential repercussions of the coronavirus crisis on Luxembourg's economy and devised strategies that could minimise rising inequalities and soften the blow to the welfare state. Their findings helped the government to take coronavirus-related measures and also shaped Luxembourg's lockdown exit plan.

It is a tale of woe all too well-known: if employees cannot work and consumers cannot buy, the lockdown risks triggering an unprecedented recession.

According to calculations of the RECOVid group, Luxembourg's production is currently being reduced at a monthly rate of 28-42%. Each additional month that the country spends in confinement sees the GDP drop by 2-3.5%.

Even if Luxembourg's economy is relaunched at full swing after the lockdown, the country is still bracing for a recession greater than the one after the 2008 financial crisis, the RECOVid economists argue.

A collapse of the worldwide and European finance system cannot be ruled out, the economists said.

Many sectors that are particularly feeling the sting of the ongoing crisis are already sectors with low-paid workforces. The crisis could therefore steepen social inequalities. If the lockdown is comparatively short, the experts explained, poverty rates would only increase insubstantially over a one-year period - workers suffering income losses should be compensated, they added.

The economists argued in favour of the so-called "double-testing" method. This would allow officials to find out whether or not individuals have fully recovered or built immunity to the virus. The implementation of the method, however, can be complicated as 40% of Luxembourg's workforce are non-residents.

The group also addressed lasting effects of the pandemic on political orientations, international relations and cooperation.