The economy of the 19-country eurozone shrank by a devastating 12.1% in the April-June period from the quarter before — the largest drop on record — as COVID-19 lockdowns shut businesses and hampered consumer spending. Economists say the worst of the downturn is past as many restrictions have eased, but that the recovery will be drawn out and vulnerable to renewed virus outbreaks.
Spain, which along with Italy was among the first to get hit hard by the spread of the virus, suffered the region’s heaviest drop at 18.5%. France, Italy and Portugal also endured steep declines, but no country escaped the impact of the pandemic. For the currency union as a whole, it was the biggest decline since the records started in 1995. The broader 27-country European Union, not all of whose members use the euro, saw output sag 11.9%.
European governments are countering the recession with massive stimulus measures. EU leaders have agreed on a €750 billion recovery fund backed by common borrowing to support the economy from 2021. 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 €1.35 trillion in newly printed money into the economy, a step which helps keep borrowing costs low.
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