Thursday, 2 Jul 2020

EU chaos: Brussels warns of ‘economic shock’ not seen since the Great Depression

Such is the dire situation for the trade bloc, Paolo Gentiloni, European Commissioner for the Economy, likened the situation to the Great Depression after the 1929 financial crisis. No EU economy is expected to see positive growth in 2020, with Greece predicted to be the worst of all member states with a contraction of 9.7 percent. The almost 10 percent drop would we a larger drop in a single year than during the financial crisis in 2009.

In 2020, the overall economy of the EU is expected to contract by 7.5 percent.

The European Economic Area, which includes non-EU states (Iceland, Norway and Lichtenstein) which have access to the single market, will contract by 7.75 percent this year.

Mr Gentiloni added: “Europe is experiencing an economic shock without precedent since the Great Depression.

“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.

“Such divergence poses a threat to the single market and the euro area – yet it can be mitigated through decisive, joint European action.

“We must rise to this challenge.”

Both Italy and Spain, the two countries which have suffered the worst from the pandemic, are both expected to contract by 9.5 and 9.4 percent respectively.

Even Germany, the strongest economy in the EU, will see a 6.5 percent drop in GDP.

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Although unemployment rates will not rise to huge levels across the bloc, Spain, Italy and France will see the highest percentage changes.

The three will see an increase of between 7.5 to 9.1 unemployment percent this year.

In terms of overall unemployment rates, Greece is expected to rise to 19.9 percent, Spain 18.9 while Italy will increase to 11.8.

For all three, those figures are much higher than the rates seen during the financial crisis – when averaged out over a five-year period.

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The statistics could worsen depending on how the virus progresses.

Although most countries in Europe are beginning to leave lockdown measures, if the virus hits again later this year, economies could contract even further.

As Executive Vice-President for an Economy that work for People, Valdis Dombrovskis these statistics can only be seen as a tentative prediction at this time.

He added: “At this stage, we can only tentatively map out the scale and gravity of the coronavirus shock to our economies.

“While the immediate fallout will be far more severe for the global economy than the financial crisis, the depth of the impact will depend on the evolution of the pandemic, our ability to safely restart economic activity and to rebound thereafter.

“This is a symmetric shock: all EU countries are affected and all are expected to have a recession this year.

“The EU and Member States have already agreed on extraordinary measures to mitigate the impact.

“Our collective recovery will depend on continued strong and coordinated responses at EU and national level.

“We are stronger together.”

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