Eurozone Economy To Crash 8.7% In 2020 – EU Forecast


The eurozone economy will plunge 8.7 percent in 2020 due to the coronavirus crisis, the European Commission said Tuesday in more pessimistic forecasts that do not see a complete rebound next year.

The new forecasts see the eurozone economy bouncing back by 6.1 percent in 2021, still leaving the region worse off than before the countries were forced to implement lockdowns in an attempt to contain the spread of COVID-19.

“The economic impact of the lockdown is more severe than we initially expected,” said Commission Vice President Valdis Dombrovskis in a statement accompanying the release of the updated forecasts.

“Looking forward to this year and next, we can expect a rebound but we will need to be vigilant about the differing pace of the recovery,” he added.

Germany, the EU’s biggest economy, is expected to see a 6.3 percent contraction this year and 5.3 percent growth in 2021.

The economies of France, Italy and Spain will each contract by more than 10 percent, and then partially recover.

France, the eurozone’s second-largest economy, is expected to contract by 10.6 percent this year and grow by 7.6 percent in 2021.

Italy, which should suffer a 11.2-percent drop this year, is only forecast to rebound by 6.1 percent in 2021.

Spain’s economy is seen as contracting by 10.9 percent before bouncing back by 7.1 percent.

“The policy response across Europe has helped to cushion the blow for our citizens, yet this remains a story of increasing divergence, inequality and insecurity,” said the EU’s economy commissioner, Paolo Gentiloni.

“This is why it is so important to reach a swift agreement on the recovery plan proposed by the Commission –- to inject both new confidence and new financing into our economies at this critical time,” he added.


German Economy Grows Faster Than Expected In Second Quarter

German flags flying outside the ReichstagThe German economy grew strongly in the second quarter raising hopes that the eurozone has come out of recession. Figures just released have shown German gross domestic product (GDP) rose 0.7% in the quarter, slightly ahead of forecasts.

New figures from France showed its economy grew 0.5%, also stronger than expected, in the second quarter. More figures will be released later on Wednesday and are expected to show it back in growth for the first time in six quarters.

German GDP enjoyed its largest expansion in more than a year, driven largely by domestic private and public consumption.

Carsten Brzeski, an economist at ING, said the figures marked an impressive comeback for Germany, which saw its economy stagnate at the start of the year.

“The biggest domestic challenge remains weak investment,” he said.

“Despite very favourable financing conditions and [the] strong international positions of many German companies, domestic investment has been sluggish for a longer while.”Andreas Scheurle from Dekabank said the eurozone been hauled out of recession and Germany had done the lion’s share of that.

“It was made possible by our generous consumers who have again spent more money but the state has also dug deeper into its pockets,” he said.

“But this rhythm can’t be maintained – growth will become more modest and in second half of the year we should see plus 0.3-0.4%.”

The French national statistics agency, Insee, said France’s GDP growth in the second quarter had been driven by a rebound in exports, domestic household demand and public spending.

The April-to-June growth was the strongest quarterly growth since early 2011 when the eurozone was plunged into its sovereign debt crisis.

The French economy has been flat for the past two years, shrinking 0.2% in each of the previous two quarters.

French Finance Minister Pierre Moscovici said Wednesday’s figure “amplifies the encouraging signs of recovery”.