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The eurozone economy recorded the biggest contraction in its history in the first three months of 2020, higher than that experienced during the Great Recession a decade ago, due to measures to contain the coronavirus.
The Gross Domestic Product (GDP) of the 19 euro countries as a whole contracted by 3.8% between January and March, compared to the previous quarter, the European statistics office Eurostat said on Thursday.
The data “are the most important decreases since the beginning of the time series in 1995,” Eurostat said in a statement, which put the contraction in GDP at 3.3% compared to the same period in 2019.
The International Monetary Fund (IMF) has already advanced in its latest projections a contraction of 7.5% of GDP in 2020 in the 19 euro countries due to the coronavirus and did not rule out a major impact.
The eurozone’s first estimate seems to confirm this trend, as well as the declines announced in its main economies: 5.8% in France in the first quarter, 4.7% in Italy and 5.2% in Spain.
“Europe is experiencing an unprecedented economic impact in modern times. It is vital that the European Union (EU) rise to the challenge, ”said the Commissioner for the Economy, Paolo Gentiloni.
Pending the release of the data on Germany, the leading European economy, on May 15, the trend is also seen in other countries in the euro area such as Belgium (-3.9%) or Austria (-2.5%).
However, as analysts point out, containment measures in Europe, such as the closure of bars, shops and economic sectors, began to be applied in March, in the last weeks of the first quarter.
Because of “March,” the drop exceeded -3.2% in the first quarter of 2009, “the worst quarter of the financial crisis,” said Florian Hense, economist at Berenger, who is ending three years of expansion. .
But “The second quarter will be even weaker than the first”, explained Bert Colijn, analyst at the ING bank, especially when the restrictions were prolonged in April and will continue in part in May.
The impact of confinement was also felt in inflation, which continued its slowdown in April to 0.4% year-on-year; and in unemployment, which registered a slight rebound to 7.4% in March, according to Eurostat.
The increase in unemployment in March was “much less than we had anticipated,” said Andrew Kenningham of Capital Economics, for whom this is justified by temporary unemployment plans nationwide.
“If not now when?”
The European Commissioner for the Economy took advantage of the publication of the data this Thursday to increase pressure on the EU countries, to adopt a strong recovery plan to emerge from the recession.
“We need a recovery plan broad enough, aimed at the most affected economies and sectors, and that it can be deployed in the coming months. If not now, when? ”Stressed Gentiloni.
The President of the European Central Bank (ECB), Christine Lagarde, reiterated that the recession in the euro area in 2020 could even reach 12% of GDP because of “uncertainty”.
After a meeting of the institution that left its main interest rate unchanged, Lagarde expressed the possibility of extending his massive debt purchase plan beyond 2020 to alleviate the impact of the virus.
At the request of the leaders last week, the head of the European Commission, Ursula von der Leyen, will present a proposal for a reconstruction plan that, according to an EU source, could be ready on May 13.
This proposed recovery instrument must be linked to the bloc’s budget for 2021-2027, but taking into account the deep divisions between the countries of the south and the north.
Southern countries like Spain or Italy defends that aid is available in a bad fund, not to increase their debts, but nations like Holland or Austria require that it be in the form of loans.
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