Economy & Politics

The historic recession in the EU is confirmed

After a first half marked by confinements, then “a vigorous rebound” with the gradual lifting of health measures, the economy of the euro zone is facing what the Commission calls “disturbances”. In Luxembourg, the year should end with a decline of 4.5% of GDP.

After a first semester marked by confinements, then “a vigorous rebound” with the gradual lifting of health measures, the euro zone economy is facing what the Commission calls “disturbances”. In Luxembourg, the year should end with a decline of 4.5% of GDP.

(Jmh with AFP) – The European Commission on Thursday drew up an alarming picture of the economic situation in the euro area, deeply affected by the Covid-19 pandemic, ruling out any rapid return to normal. In its forecasts, the European executive is counting on a fall of 7.8% of the gross domestic product (GDP) in the region in 2020. That is to say a little worse than its forecasts for spring, where it estimated this decline at 7.7 %. Unheard of since the creation of the single currency in 1999.

Paolo gentiloni

The European Commission on Wednesday predicted a major economic slowdown this year among member states, devastated by the economic fallout from the coronavirus pandemic, which requires an unprecedented stimulus package.

In question: the second wave of the pandemic which is currently hitting Europe, forcing several countries to partly reconfine their population. It “creates even more uncertainty and destroys our hopes of a rapid rebound”, summed up Commission Vice-President Valdis Dombrovskis. “We have never counted on a V-shaped recovery. Now we know for sure that we will not have it”, added the European Commissioner for the Economy, Paolo Gentiloni.

Brussels estimates that the activity “will hardly return to the pre-pandemic level in 2022”. But she underlines that the “high degree of uncertainties” which still weighs on the economy pleads rather for a return to normal in 2023. Among these uncertainties is of course a possible further worsening of the health crisis which would further reduce activity. and would soar unemployment. But Brussels also evokes the future commercial relationship with the United Kingdom. The two sides are struggling to negotiate an agreement that would enter into force next year, which “clearly weighs” on the EU’s economic outlook, said Valdis Dombrovskis. The Commission also takes a pessimistic side, its forecasts being based on the scenario of a “no deal” at the end of the year.

Ministry of Finance - Foto: Pierre Matgé / Luxemburger Wort

Over the first three months of the year, revenues collected by the State are down (-8.4%) while spending jumped 28.5%, according to data released Monday by the Ministry of Finances. In question, the aid measures put in place by the government to respond to the health crisis.

While all 19 countries in the euro zone are unsurprisingly entering recession this year, three are particularly hard hit: Spain (-12.4%), Italy (-9.9%) and France (-9 , 4%). These figures reflect both the severity of the health crisis in these countries and their greater dependence on services, particularly related to tourism. The industry has generally taken the shock better. Germany, Europe’s largest economy, thus managed to moderate the extent of the fall, with a GDP down “only” 5.6% in 2020.

Luxembourg shows a decline of 4.5%. For 2021, expected growth should reach 3.9% before settling at 2.7% in 2022. This is slightly at the level recorded before the health crisis where the country recorded a growth of 2.3% of its GDP in 2019. The latest Statec forecasts, published last June, forecast a recovery of 7% in 2021. Asked about this aspect at the start of the week, Serge Allegrezza, director of Statec, indicated that his services had prepared “two scenarios: one bad with a hell of a recession and the other even worse, catastrophic, let’s say it. ”

Understand that the second wave of infections that the country is currently experiencing will push back the expected recovery. And the latter to specify that the economic report which will be released “at the end of November, or even a little earlier because certain things are being done”, will update the forecasts for 2021 and 2022. No details on the estimated decline of growth for the next two years has not been advanced.

Despite this context, Paolo Gentiloni on Thursday called on member states to continue their “economic and budgetary policies favorable” to growth. He also hopes that the flagship measure decided by the EU to revive the continent’s economy, a colossal common debt intended to finance the recovery plans of the Member States, can be implemented from the “first half of 2021”. Problem: the European Parliament and the Member States are struggling for the moment to give their violins to the future EU budget for the period 2021-2027, to which this recovery plan is backed.

Related Articles

Back to top button