EU officials have forecast "the deepest economic recession" in the bloc's history as a result of the coronavirus. Failure to agree on common solutions for the post-pandemic recovery could undermine the European project.
European Commissioner for the Economy Paolo Gentiloni told reporters on Wednesday that the bloc is headed for "a recession of historic proportions this year" as a result of the novel coronavirus pandemic.
"It is now quite clear that the EU has entered the deepest economic recession in its history," Gentiloni said. "Economic activity in the EU dropped by around one-third practically overnight."
The novel coronavirus pandemic has hit the global economy hard. Governments have enacted tough restrictions on mobility along with social distancing measures aimed at curbing the pandemic. However, those measures have also severely limited business operations and economic activity.
Threat of longer pandemic
This year, the EU's economy — comprising 27 member states — is expected to contract by 7.5%, while the eurozone economy is predicted to shrink by 7.75%. Although the EU and eurozone economies are not expected to make up the shortfall in 2021, forecasts show them growing by more than 6% next year.
However, those forecasts account for a continual easing of restrictions. If lockdown restrictions remain in place for two months, some EU economies — including Germany's — could shrink by up to 14%, according to a report published last month by the European Network for Economic and Fiscal Policy Research.
"A more severe and longer-lasting pandemic than currently envisaged could cause a far larger fall in GDP that assumed," Gentiloni said.
Elusive recovery plans
The post-pandemic recovery is dependent on "the speed at which lockdowns can be lifted, the importance of services like tourism in each economy and by each country's financial resources," he said.
"Such divergence poses a threat to the single market and the euro area — yet it can be mitigated through decisive, joint European action," he added.
However, even joint European action remains elusive as EU member states struggle to agree on financial instruments to spur the post-pandemic recovery, especially in frontline countries such as Italy and Spain. Germany, in particular, has spearheaded efforts to streamline financial assistance for the hardest-hit countries.
ls/sms (AP, AFP)