breaking The euro area economy is shrinking at a record pace news
The eurozone economy shrank at the fastest record pace in the first quarter, when the Covid-19 pandemic forced countries to block. First estimates of GDP between January and March showed a decrease of 3.8%, worse than during the financial crisis. Separate data revealed a sharp decline in economic activity in France and Spain during the same period. In Germany, unemployment has risen, although it remains relatively low compared to other nations.
On Wednesday, the US revealed that its economy felt the strongest contraction in over a decade after GDP contracted at an annual rate of 4.8% in the first quarter of the year. However, this “annual” indicator means that the US economy has actually shrunk by around 1.2% over three months, which is less severe than in the euro area. On Thursday, data from the US Department of Labor showed that 3.8 million more Americans filed for unemployment benefits last week. This is the lowest weekly increase in a month, but still very high, resulting in job losses during a pandemic to around 30 million.
Andrew Kenningham of Capital Economics called European
news a blizzard of depressing economic data that “confirms that the eurozone economy is in a phase of free collapse.” In the case of France, the 5.8% decrease in gross domestic product (GDP) was the largest recorded by the quarterly series since its beginning in 1949. Two other large economies have published first estimates: Spain recorded a decline of 5.1%, while the Italian economy contracted by 4.7%. The number for the entire euro area was more moderate, but by all standards it is strict, especially in the case of contraction in just three months. To date, most individual European countries have not published national estimates. This applies to the largest of them, Germany. But new data on the German labor market are beginning to show the impact of a pandemic, with the number of unemployed rising by 373,000 in April.
However, the full impact is suppressed by the national system of financial assistance for people shortening working time, known as Kurzarbeit. Claus Vistesen of Pantheon Macroeconomics said the news about Geman’s labor market was “bad, but without Kurzarbeit it would be catastrophic.” Height warning The President of the European Central Bank (ECB) Christine Lagarde said the sharp decline in economic activity in the eurozone in April “suggests that the impact [pandemic] is likely to be even more serious in the second quarter.” She warned that economic growth in the eurozone could fall between 5% and 12% this year, “depending on the duration of measures to limit the spread and success of policies to mitigate the economic effects on businesses and employees.” Ms Lagarde added that the ECB was fully prepared to increase its emergency support measures to ease the burden of a pandemic, “as long as necessary and as long as necessary”.
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