The European Commission, the bloc’s administrative arm, said the EU economy would shrink 8.3% this year, downgrading from forecasts released in May which contracted 7.4%. The subgroup of 19 countries that share the euro currency will get even worse, shrinking 8.7% this year.
At stake is the economic health of the world’s wealthiest block of nations, a key trading partner of the United States and home to one of the most important currencies in world trade and savings, the euro.
The data is particularly grim for the countries on the south bank of the bloc, some of which have been particularly affected by the virus. Italy, the EU’s third economy, is expected to fall 11.2%. Spain, fourth in importance, faces a 10.9% recession. France, second after Germany, will decrease by 10.6%.
The commission warned that these predictions were tenuous and assumed “that the lockdowns will continue to loosen and that there will be no” second wave “of infections”.
But forecasters noted that a recovery was already underway in parts of the block.
“The first data from May and June suggest that the worst could be over,” said the commission. “The recovery should gain momentum in the second half, although it remains incomplete and uneven across member states.”
Both reports stressed the need for continued government intervention.
Next week, EU leaders are expected to meet in person for the first time in months to try to reach a compromise on a 750 billion euro ($ 855 billion) fund that will inject money. money in member states’ economies to support their recoveries.
Paolo Gentiloni, the economic commissioner of the European Union, said in a statement that if European governments had worked to soften the blow of the pandemic, “it remains a story of growing divergence, inequality and insecurity. He added that it was important “to quickly reach agreement on the recovery plan”.