<p>This paper looks into the drivers of the significant regional heterogeneity of the economic impact of the COVID-19 observed in the four largest euro area economies during the first wave of the pandemic. In particular, it investigates how the interplay between the stringency of governments’ containment measures, sectoral structure and trade linkages help explaining the within-country regional heterogeneity of the labour market impact of the pandemic, as measured by the number of employees in short-time work schemes. It finds that the propagation of the economic impact across regions cannot be explained by the spread of infections only. Instead, a region’s economic structure is a significant driver of the observed heterogeneity. Moreover, our results suggest that a region’s trade relations, both within and across countries, represent a relevant indirect channel through which COVID-19 related disruptions affect regional economic activity. In this regard, the analysis depicts vulnerabilities arising from potential disruptions of the highly integrated EU supply chains.</p>