The economy of the 19-country eurozone shrank by a record 12.1% during the second quarter as coronavirus lockdowns froze business and consumer activity.
Spain, which suffered a severe virus outbreak that devastated its tourism industry, was the hardest hit with an 18.5% drop. Italy and Portugal were also hard hit. It was the biggest decline since the records started in 1995.
The decline in Europe compares to a 9.5% quarter-on-quarter decline for the United States.
European governments are countering the downturn with massive stimulus measures at the national and European Union level. EU leaders have agreed on a €750bn recovery fund backed by common borrowing to support the recovery from 2021.
12.1% How much the eurozone economy shrank during the second quarter
National governments have stepped in with loans to keep businesses afloat and wage support programmes that pay workers salaries while they are furloughed.
The European Central Bank is pumping €1.35tn in newly printed money into the economy through bond purchases, a step which helps keep borrowing costs low.
The Spanish contraction was by far the sharpest slump since the country’s national statistics agency began collecting data. Spanish Prime Minister Pedro Sanchez is due to meet with the leaders of Spain’s regions to discuss how to rebuild the economy and where to deploy billions of euro in European Union aid for recovery.
In France, the startling plunge of 13.8% in April-June from the previous three-month period also starkly illustrated the punishing economic cost of its two-month lockdown. It was the third consecutive quarter of economic contraction in France’s worsening recession.
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 upwards again.
France’s economy was already shrinking in the last quarter of 2019, before the coronavirus pandemic hit with full force. For France and other major economies, it caused a head-spinning decline.
“All the growth in GDP seen in the 2010-2019 decade has been wiped out in five months,” said Marc Ostwald, chief economist at ADM Investor Services International. In Italy’s case, economists said it wiped out about 30 years of growth.
As lockdowns have eased and many businesses reopened, there are hopes the recession will be short-lived, though an uptick in contagions in many countries remains a risk.
France is faring worse than Germany, Europe’s largest economy, which reported a 10.1% plunge in GDP during the April-June period as its exports and business investment collapsed.
Germany’s drop was also the biggest since quarterly growth figures began being compiled in 1970, the official statistics agency said.