The novel coronvirus pandemic hit the European economy very hard during the second quarter with a contraction of 11.9 per cent s the economy was pushed into a deep recession.
In terms of the quarter-on-quarter contraction in the GDP of European Union for the second quarter, it was the worst on record and followed a 3.2 per cent contraction in the first three months of the current year.
There was a 14.4 per cent year on year drop in of output in the April-to-June quarter. That as more than a contraction of 9.5 per cent reported for the same period in the United States economy.
But according to a number of recent surveys of business activity in the EU, there re clear indications of a recovery of the economy. However, there is also an impending threat of the second wave of the novel coronavirus pandemic.
A recent spike in Cvoid-19 cases was “very disturbing”, said Germany’s center for disease control, the Robert Koch Institute, earlier this week.
There has been a spurt in cases in France at the same level as it was when the strict lockdown was lifted in the court in early May. Record increases in cases of infection are also being reported from Spain and Italy.
A quarantine measure s reimposed by the United Kingdom recently on all travelers arriving from Spain which is feared to cause a slow down the recovery in its vital tourism industry.
Compared to the other big EU countries, the hit to the German economy, the largest of Europe, was less for the second quarter. The country reported a 10.1 per cent contraction of its GDP. Drop in GDP of 13.8 per cent, 12.4 per cent and 18.5 per cent were reported for the second quarter for the economies of France, Italy and Spain respectively.
According to economists, a contraction of 12 per cent in GDP for the EU was being expected. But what is of concerns for economists is thee wide gap in contraction between the economies of Spain and the other big economies of the bloc.
“The difference is larger than expected and with reopening measures being locally reversed for [the third quarter], Spain looks set for a prolonged slump,” said Bert Colijn, senior economist at ING.
It is expected that the EU economy will contract by 8.3 per cent % in 2020, according to the latest forecast from the European Commission. That forecast was based on assumptions that the restrictions to economic activities would continue to be eased and there would not be a major second wave of the pandemic that would require large scale quarantine measures such as lockdowns.
A €750 billion ($888 billion) recovery fund to aid in recovery of the EU economies that have been hit very hard by the novel coronavirus pandemic as agreed upon recently by EU leaders. The fund will be financed through borrowing by the European Commission from financial markets and half of it would be distributed as grants to those countries that are the hardest within the EU. The rest of the amount would be distributed as loans.
(Adapted from CNN.com)