Covid-19 recession clouds gather across Europe

France, the rest of the eurozone, and the UK will join the Irish economy in slumping into recession this year, while the US is already shedding millions of jobs amid the Covid-19 storm, economists have warned.

The eurozone and the UK will face contractions of 2% in 2020, before "a gradual rebound" of potentially more than 3% next year, according to S&P Global Ratings.

"Risks to our forecast are skewed to the downside: The pandemic might last longer and be more widespread than we currently envisage," Europe chief economist Sylvain Broyer at the ratings firm said.

"The size and kind of policy responses countries take now are key to avoiding permanent economic damage later," he said.

The figures compare with the slump of over 7% in Irish GDP this year projected by the Economic and Social Research Institute, in its latest report.

S&P warns that Europe’’s slump could get a lot worse, if the health crisis extends for a long period.

"Risks are still to the downside, as the pandemic might last longer and be more widespread than we currently envisage," Mr Broyer said.

"For example, we estimate a lockdown of four months could lower eurozone GDP by up to 10% this year," he said.

On the French economy, economists at Capital Economics in London cite figures from the French statistics office that show activity "is currently running a whopping 35% below normal".

"If so, the downturn in France, and presumably elsewhere, may be even bigger than we had thought," said Capital Economics.

The French statistics are based on early information from electricity demand, railway travel and payment card transactions, in recent weeks.

In Ireland, the Institute of Directors (IoD) said most of its business bosses believe the pandemic will threaten their companies.

"In the space of just a few months, the world as we know it has changed utterly - business leaders are finding themselves in unchartered waters, having to take very difficult decisions to protect the livelihoods of their staff and the immediate business continuity of their organisations in the short term," said IoD chief executive Maura Quinn.

Chris Beauchamp, chief market analyst at online broker IG, said that US stock markets were saved in the latest session as Federal Reserve chief Jerome Powell settled investors’’ nerves with promises the US central bank would take even more action to strengthen the US economy defences from the fallout of the pandemic.

The S&P index survived the scare of the number of Americans filing claims for unemployment benefits surging to 3.28 million in a week.

The promise of the US government spending $2 trillion (€1.85bn) to fight the economic fallout from Covid-19 will help soften the effects on the US economy, investors believe.

In Ireland, the Iseq index rose strongly, by 4.5%, as the shares in AIB roared back, and surged by 17% in the session.

AIB and Bank of Ireland have been among the leading casualties of the stock market rout in the last two weeks.

Bank of Ireland shares ended 6% higher in the session.

Other irish companies exposed to the effects of the lockdown, including forecourt fuels firm Applegreen, hotelier Dalata, and Swiss-Irish food producer Aryzta fared badly, however.