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European Commission predicts deep recession in 2020

2020-05-06T09:27:42.057Z


Euro area GDP is expected to fall 7.7% this year. Over one year, the unemployment rate would climb to 9.6%, up two points.


The European Commission released its spring economic forecast on Wednesday morning. The very first since the coronavirus crisis hit Europe. Not surprisingly, the continent will plunge into a deep recession. Concretely, the GDP of the euro zone would fall by 7.7% this year and that of the EU by 7.4%. This represents a decrease of around 9 points compared to the previous Commission forecasts published last fall.

Read also: The world in the worst recession since the Great Depression of the 1930s

Paolo Gentiloni, the European Commissioner in charge of Economic and Monetary Affairs speaks of " an unprecedented economic shock since the Great Depression ". But this shock could be much stronger. The Commission in fact mentions " exceptionally high uncertainty ". " The forecast baseline scenario assumes that the bottlenecks will be gradually lifted from May ", warns Brussels, adding that " a more serious and longer-lasting pandemic than the one currently envisaged could lead to an even greater drop in GDP than expected in the baseline scenario of this forecast" In short, if there were to be a second wave of contamination in the summer, the European economy would plunge much more.

All Member States, without exception, will see their economies capsize, knowing that all have been forced to take more or less severe containment measures to slow the spread of Covid-19. " It is a symmetrical shock ," says Vice-President of the European Commission, Valdis Dombrovskis. But the fall promises to be even more dizzying for certain countries, members of the euro zone. Four of them will see their GDP fall sharply. Greece would be the most impacted with a decline of 9.7%, followed by Italy (-9.5%), Spain (9.4%) and ... France (-8.2 %). Conversely, other countries would fare better, according to forecasts by the European Commission. This is the case of Finland (-6.3%), Germany (-6.5%), the Netherlands (-6.8%), but also Portugal (-6.8% ).

The shock is such that the unemployment rate will mechanically rise sharply. In the euro zone, it would climb to 9.6% at the end of the year, up two points compared to the end of 2019. The unemployment rate would thus cross the 10% mark in France, against 8.5% at the end 2019. In Germany, this rate would drop from 3.2 to 4%.

At the same time, the indebtedness of the member states of the euro zone would soar: 102.7% at the end of 2020 against 86% at the end of 2019. Greece would approach a volume of debt equivalent to 200% of GDP, with a rate of 196% against 176.6 at the end of 2019. Italy would also see its public debt dangerously increase: 158% against 134%. France would happily pass the 100% of GDP bar with a ratio of 116% against 98% previously.

More reassuring forecasts for 2021

The European Commission's forecasts are more reassuring for 2021. Unless Europe experiences a second wave, European economies should indeed recover vigorously. The European Commission therefore expects GDP growth of 6.3% for the euro area and 6% for the entire Union. In France, it could expect 7.4%.
These forecasts will be discussed Friday at a meeting of European finance ministers. The Twenty-Seven must, in the coming weeks, try to find a compromise around a recovery plan that would allow the bloc to restart faster. But some countries (Germany and the Netherlands in particular) oppose mutual debts. The President of the European Commission must present by the end of the month a recovery plan and a modified European budget project. The EU and the Member States have already agreed on extraordinary measures to mitigate the impact. Our collective recovery will depend on the pursuit of strong and coordinated responses at European and national levels. We are stronger together, ”says Valdis Dombrovskis.

Source: lefigaro

All business articles on 2020-05-06

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