Eurozone economy set to contract by 8.7%

The eurozone economy is expected to contract by 8.7% this year.
Eurozone economy set to contract by 8.7%
The economic contraction is worse than previously forecast.
The economic contraction is worse than previously forecast.

The eurozone economy is expected to contract by 8.7% this year.

The European Commission says the euro area is experiencing a 'deep recession' due to the Covid-19 pandemic.

The Commission says the 19 countries operating the euro would see their economies contract.

In its summer economic forecast, the European Commission is projecting the European area's economy to contract by 8.7% in 2020 and grow by 6.1% in 2021.

While the EU's economy as a whole will contract by 8.3% this year, but grow by 5.8% next year.

The latest predictions are roughly one percentage point worse than the 7.7% and 7.4% projections from the spring forecast in April.

The commission also says next year's growth will be slightly less robust than previously anticipated.

Speaking about the latest economic figures, Paolo Gentiloni, EU Commissioner for the Economy, said: “Coronavirus has now claimed the lives of more than half a million people worldwide, a number still rising by the day - in some parts of the world at an alarming rate.

"And this forecast shows the devastating economic effects of that pandemic.

"The policy response across Europe has helped to cushion the blow for our citizens, yet this remains a story of increasing divergence, inequality and insecurity.

Mr Gentiloni said the new figures also demonstrated the necessity to agree on a recovery plan for the European economy by the member states as soon as possible.

He said: "It is so important to reach a swift agreement on the recovery plan proposed by the Commission – to inject both new confidence and new financing into our economies at this critical time.”

Head of EU Representation in Ireland, Gerry Kiely says it could be years before economic activity returns to normal in Ireland and that the threat of a hard Brexit, as well as a second Covid-19 outbreak, pose a particular threat.

Mr Kiely says: "There are further threats on the horizon such as second-wave [Covid] whether it is at home or imported.

"And of course in Ireland's case we also have the negative threat of a hard Brexit.

We are not going to get back where we were before Covid before the end of 2021 and probably into 2022."

The sharper than expected decline in European growth adds expectation to a European Council meeting next week.

A decision is expected on the Multi-annual Financial Framework and the proposed EU Recovery Plan.

Fianna Fáil MEP, Billy Kelleher said decisive policy action is necessary to prevent long-lasting economic damage

Mr Kelleher said: "We need action now, and we need real investment to kick start the economy. An investment-led recovery is the only way to grow ourselves out of this economic crisis.

“A deep recession is on the cards if Europe, collectively, does not commit to significant fiscal stimulus and investment."

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