Record 12.1pc collapse in Q2 eurozone GDP

Marco Green
August 1, 2020

European Union leaders have agreed on a 750 billion-euro recovery fund backed by common borrowing to support the economy from 2021.

The contraction in the euro zone's second-largest economy was steeper than the 10.1% reported by Germany, where authorities kept a surge in COVID-19 related deaths in check and did not have to enforce a lockdown as strict as France's.

The Spanish economy, which had already shrunk by 5.2% in the first quarter, is now in its steepest recession ever.

Economists say the downturn was concentrated in the months of April and May when lockdowns were most severe. The pain has been so damaging to jobs and industries that the government is talking down the possibility of another nationwide lockdown as infections tick upward again. For France and other major economies, it caused a head-spinning decline.

Italy's official forecast is for a full-year GDP contraction of 8% this year, although Economy Minister Roberto Gualtieri has said this will probably have to be revised lower.

French households could be sitting on a 100 billion-euro pool of savings by the end of the year, the governor of the Bank of France estimated earlier.

There was a huge drop in GDP also in Germany, Europe's biggest economy.

In the April-June period, it suffered its biggest contraction since data-tracking began in 1995. Looking to halt the spread, the government introduced rigid restrictions on trade and travel on March 9, forcing most businesses to close.

Italy was the first European country to be hit by the pandemic, which has officially killed over 35,000 people in the country.

Locked-down families, many surviving on government handouts and job-preservation schemes, tightened their purse strings amid fears for jobs but also because shops were closed.

The French lockdown was stringently enforced until May 11, with non-essential shops shut down, and gradually lifted over the course of the second quarter, with cafes and restaurants being allowed to open on June 2.

Trade was also battered, as global lockdowns grounded flights, closed borders and factories, and threw transport into disarray.

The damage to exports was even more pronounced, down by a whopping 25.5% in the second quarter after retreating by 6.1% in the first quarter.

Other reports by Click Lancashire

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