Brussels is Good news for Europe is that the pandemic begins to wane. This week the number of deaths in Italy was the lowest in almost two months. And German Chancellor Angela Merkel announced that in the coming days will resume its work of schools, kindergartens and restaurants.
And that relief may be short-lived.
On Wednesday, the European Commission has published a forecast that the economic downturn in Europe in the current year will amount to 7.4%. One senior official told citizens of the EU, they needed to wait for “the deepest economic recession in the history of the European Union.”
To give the opportunity to see this figure in comparison, it should be said that for the current year to the economy of the bloc composed of 27 countries predicted growth of 1.2%. In 2009 after the global financial crisis, the EU economy fell by 4.5%.
It’s a grim reminder that even if the threat of the virus will dissipate, the economic consequences of a pandemic is a heavy burden for the world economy for months, if not years.
In China, where the outbreak in recent weeks has subsided, again the factories supplying the global supply chain. But buyers of Chinese goods a little, and so its economy will recover slowly.
In the US, where in the most affected areas has slowed the growth of disease, increase calls to cancel the isolation. But there are signs that the economic recovery will be weak. On Friday the government should publish monthly report on employment, and according to some forecasts, in April, jobs was 20 million less. Such growth of unemployment nullifies all the achievements of the last decade.
The European Union, where the lives of 440 million people, is the main trading partner of the United States and ranks second in trade with China. The EU is the largest investor in the countries of sub-Saharan Africa and in other parts of the developing world.
A prolonged recession in Europe, the second wave of coronavirus or weak economic recovery bodes for more trouble and suffering for many Europeans, and can also cause serious damage to companies, banks and individuals worldwide. The crisis also revives the political differences between the rich North and less rich South, threatening to break the fragile balance between these very different countries, whose economies are closely linked.
Economic recovery may begin in the second half of the year, but occur it will be uneven, said the European Commissioner for the economy, Paolo Gentiloni (Paolo Gentiloni), speaking at a press conference after the publication of the forecast is issued four times a year. But by the end of 2021 the EU will be in worse shape than two months ago when the fashion industry went on the offensive on the continent. In the first three months of this year, GDP decreased by 4.8% year on year, and some economists believe that in the current quarter, the reduction in the annual rate of 30% or more.
“The danger of a deeper and more prolonged recession quite real,” — said in the Preface to the forecast of the head of the economic Department of the European Commission Maarten Verweij (Maarten Verwey).
According to him, in the case of the second wave of the virus after mode isolation, the economic performance for this year will fall by another three percentage points.
Gentiloni said that the most affected Italy and Spain, the economic contraction for this year may be more than nine percent. The slowest economic recovery in Italy.
According to forecasts, more than anyone in the EU will hurt the Greek economy, which is only just beginning to recover after 10 years of economic disasters. This year the volume of production there will decline by 9.7%. The least affected Poland, where the decline will be 4.5%.
© RIA Novosti, the Kostis Tantalis | go to photobacteria in Greece in connection with the coronavirus
According to forecasts of the European Commission, the unemployment rate in the average unit could reach nine percent. A year earlier it was equal to 6.7%.
The largest EU economy German. She also suffered significant losses by engaging in the most serious post-Second world war recession, and the recession it will be 6.5%. But she quickly recovers. The French economy is standing on second place in Europe this year could fall by 8.5%.
The deep recession in the European economy will have serious consequences for growth and employment in the United States because their economies are closely interlinked. The European Union and the United States are each other’s largest trading partners. Trade and exchange of services over the past year amounted to 1.3 trillion dollars. Such European companies as Daimler AG, BMW and Siemens to give US work more than four million people. These figures lead the American government.
Will suffer and China. In terms of procurement of Chinese goods to the EU is second only to the United States.
Economic picture looks bleak. But the global economy faces even more serious danger. It lies in the fact that a growing schism between members of the EU and its leaders will lead to a weakening of the single European currency. It almost happened in the early years of the last decade, but the weakening of the Euro has prevented the European Central Bank, which has used all its financial power and did not give Greece, Italy and Spain go bankrupt.
The Central Bank again fills the Eurozone loans and buying bonds from Eurozone countries, trying to make their borrowing costs got out of control. But this time the ECB will have less opportunities to save the Euro, because on Tuesday the Supreme court issued its ruling.
The constitutional court of this country was practically an ultimatum to the European Central Bank, saying that he needs to prove that the side effects from the purchase of bonds does not outweigh the economic benefits. The court has threatened to ban the Central Bank of Germany (Bundesbank) to participate in the incentive program, which would be a serious breach in the unity of Europe.
Coronavirus has already spawned in Europe far more serious economic consequences than those that emerged after the financial crisis in 2008.
“They are clearly much bigger, and they occur much faster,” said Wednesday during an online presentation Fuest Clemens (Clemens Fuest), who heads one of the leading analytical centers of Germany in the field of Economics the economic research Institute (IFO).
A pandemic can create such consequences for politics and society that are impossible to predict. Economic problems caused by the financial crisis of 2008, helped to strengthen the position of extreme right-wing populist movements in Germany, Italy and France.
Europe remains to hope that the economy will recover quickly after the lifting of the isolation. Optimistic economists call this a V-shaped recession.
In Italy many regions have already resumed work in the factories while Germany this week allowed in hairdressing and beauty again serve visitors. Next week a gradual exit from isolation will begin France.
But many restrictions will be maintained, including the ban on public gatherings. And I don’t know, coming or not the second wave of the virus, when life will resume.
The new numbers will force European leaders to come up with a bold joint response to the recession that the economic recovery was not unilateral and does not suffer distortions. This situation would cause considerable damage in a common currency and would create new political unrest in countries with the weakest economies.
The leaders approved a package of half a trillion dollars, which in fact are a requirement for rich countries to provide subsidies for the rehabilitation of the poor who suffered most from the crisis. But they are still subjected to sharp criticism for what they are not doing enough.
“This steady schism threatens the single market and the Eurozone, but it is possible to eliminate a determined and joint action of Europe,” said Gentiloni.