The European Union is bracing itself for a “recession of historic proportions” this year, when it will experience the biggest shock since Great Depression, with the COVID-19 pandemic expected to cause a 7.4% contraction of economic output, before growing by about 6% in 2021. “Europe is experiencing an economic shock without precedent since the Great Depression,” EU Economy Commissioner Paolo Gentiloni said in a statement. “Both the depth of the recession and the strength of recovery will be uneven, conditioned by the speed at which lockdowns can be lifted, the importance of services like tourism in each economy and by each country’s financial resources.” He also warned the sharp downturn poses a threat to the EU’s single currency and the single market.
More than 1.1 million people have contracted the virus across Europe, and more than 137,000 have died, according to the European Centre for Disease Prevention and Control. As a result of the COVID19 outbreak and the ensuing lockdown measures, Greece, Italy, Spain and Croatia are all set to see their economies shrink by more than 9% this year. These are heavily reliant on tourism, a sector which has been pummelled by weeks of nationwide lockdowns and travel restrictions. Even Europe’s economic powerhouse Germany is set to see its GDP contract by 6.5%. “The situation is … that this deep recession risks to cause different conditions and have different consequences in different member states,” Gentiloni also noted. The extent of the damage it ultimately inflicts on individual member countries will depend on the evolution of the disease in each of them, the resilience of their economies and what policies they put in place to respond.
The spread of coronavirus is slowing down in most member states, which are now gradually reopening their economies. But the damage is done. The pandemic has hurt industrial output, consumer spending, investment, capital flows, international trade and supply chains, and also thrown millions of people out of their jobs. The unemployment rate across the bloc is forecast to rise from 6.7% in 2019 to 9% in 2020 but then fall to approximately 8% in 2021, the Commission said. Italy, Spain, Portugal and Greece will be among the hardest-hit by the economic effects of the pandemic, while Austria, Luxembourg and Malta are expected to weather the shock better. Expectations for Europe’s economy have changed dramatically since 13 February, when the Commission had predicted “a path of steady, moderate growth” of 1.2% in 2020-2021.
