Into the Trough: Europe Braces for Deeper-Than-Expected Coronavirus Recession

Written by | Thursday, July 9th, 2020

Europe is bracing for a deeper-than expected recession in 2020, as Brussels is forecasting an 8.3% drop in GDP for the 27 economies of the European Union followed by a 5.8% rebound in 2021. These figures indicate worse decline and weaker rebound than the historic downturn that the Commission had forecast in its earlier estimates only two months ago. France, Spain and Italy are facing the steepest falls in output (10.6%, 10.9% and 11.2% respectively), while Germany and the Netherlands confront less severe falls in GDP (6.3% and -6.8% respectively) and Poland is forecast to escape with the shallowest recession (-4.6%).
“The road to recovery is still paved with uncertainty,” said Paolo Gentiloni, the EU commissioner for the economy. “Risks are mostly, but not all, on the downside,” Gentiloni said, adding that forecasters’ assumptions about the pandemic could prove optimistic. “In the absence of a vaccine and treatment options for Covid-19, any sustained increase in the number of infections or further major economic outbreaks would worsen the economic outlook.” These bleak figures were released only days before EU leaders are to meet in Brussels to search for agreement on a €750bn recovery plan, following a landmark German-Franco proposal for grants to help the hardest-hit countries.
The German Chancellor, Angela Merkel, whose country has just taken over the reins of the EU Council presidency from Croatia, yesterday (8 July) debated the merits of the trillion-euro rescue package with the European Parliament. Adressing the MEPs in Brussels, Merkel said that there was no time to waste on finding an agreement for the recovery fund, adding „we all need to make compromises“. While all players say they want to strike a deal as early as July, the plan continues to face fierce resistance from the self-styled “frugal four”, Austria, Denmark, Sweden and the Netherlands, which oppose grants, favouring loans. “Europe is capable if we stick together and stand united,” was Merkel‘s closing remark in her speech that was dotted with references to ‚solidarity‘ and ‚sticking together‘.
In a separate but related development, Italian cabinet has approved a package of measures aimed at cutting the country’s notoriously complex bureaucracy to simplify legislation for range of sectors – including public tenders, digitalisation, rules for corporate capital increases and the criminal responsibility of public officials – to help revive its coronavirus-battered economy. Italy‘s complicated red tape that has long been blamed for crimping growth in the eurozone’s third-largest economy. The World Bank’s ‚2020 Ease of Doing Business‘ survey ranked Italy 58th, well behind most European countries and losing ground for the second year in a row. The “simplification decree,” approved on Tuesday (6 July) after weeks of fierce political negotiation, has been touted by Prime Minister Giuseppe Conte as “the mother of all reforms”.

Article Categories:

Leave a Comment

Your email address will not be published.