The quarter-on-quarter slump in EU GDP is the worst on record, and follows a fall of 3.2% in the first three months of the year.
Compared with the same period a year ago, the drop in output in the April-to-June quarter was 14.4%. That’s worse than the 9.5% slump recorded Thursday by the United States.
Recent surveys of business activity suggest Europe’s economy is now in recovery mode. But the specter of another wave of coronavirus cases looms. Germany’s center for disease control, the Robert Koch Institute, said this week that a recent spike in cases was “very disturbing.” In France, new daily cases have crept back to the same level as when its lockdown lifted in early May. Spain and Italy have also recorded increases.
The United Kingdom recently reimposed quarantine measures for travelers arriving from Spain, a move that will slow the recovery in its vital tourism industry.
Germany, Europe’s biggest economy, suffered less than other big EU countries in the second quarter, reporting a 10.1% hit to GDP. France, Italy and Spain, which were hit harder by the pandemic, recorded falls of 13.8%, 12.4%, and 18.5%, respectively.
Spain is struggling
Economists were expecting a fall of around 12% across the European Union. But the gap between Spain and the other big regional economies is troubling.
“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.
According to the latest forecast from the European Commission, the EU economy will shrink 8.3% in 2020. The forecast assumes that restrictions will continue to ease, and that there won’t be a major second wave that triggers large-scale quarantine measures.
EU leaders agreed earlier this month to create a €750 billion ($888 billion) recovery fund to help rebuild the EU economies ravaged most by the coronavirus crisis. The European Commission will borrow the money on financial markets and distribute just over half of it as grants to the hardest hit EU states, with the rest provided as loans.