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European Union: Great Depression 2.0?

European Union: Great Depression 2.0?
Written by Harry S. Johnson
In a grim Spring Economic Forecast, released today, the European Commission predicted that most of the continent will plummet into the worst economic and financial slump since the 1930s, in the wake of the COVID-19 pandemic.

European Union has had to abandon any hope of growth, as the block’s economies are set to contract by 7.5 percent, according to this year’s latest official forecast. The decline is set to be the worst ever for the eurozone. Compared to previous estimates, growth projections have been revised down by around nine percentage points.

While the EU expects that the deep recession will be followed by a growth of over six percent, the losses inflicted by the virus are unlikely to be offset till the end of 2021.

“Europe is experiencing an economic shock without precedent since the Great Depression,” said European Commissioner for the Economy Paolo Gentiloni.

The recovery is also expected to be rather “uneven,” as lockdown measures to stop the spread of the coronavirus will not be lifted simultaneously by all the members of the European Union.

The European Union’s Vice President for Economic Affairs Valdis Dombrovskis issued a statement, saying that while the immediate fallout will be far more severe for the global economy than the financial crisis, the depth of the impact will depend on the evolution of the pandemic, the block’s ability to safely restart economic activity and to rebound thereafter.

The European Commission also warned that the figures may change for the worse if the pandemic lasts longer, preventing the reopening of businesses and travel. The economic downturn may be “far larger” than assumed in the baseline scenario of the latest forecast.

Some members of the union, including economic heavyweights, have already made their own gloomy predictions on the aftermath of the coronavirus outbreak. EU’s biggest economy, Germany, said it could record the worst economic dive in the post war-era, as its gross domestic product (GDP) may decline over six percent. France expects almost the same downturn as Germany, while Spain expects its economy to contract by 9.2 percent this year.