Italian and French economies crash in first quarter as coronavirus bites
The Italian and French economies shrank by more than five per cent in the first quarter of the year as normal life was halted to try to tackle coronavirus, data has confirmed.
France’s statistics body today said its economy shrank by 5.3 per cent, slightly less than originally thought. But it was still the worst quarter since 1969, when student protests shook the country.
Italy’s economy also contracted by 5.3 per cent in the first quarter, official figures showed today. That was worse than the 4.7 per cent drop that initial estimates had suggested. It was the worst drop since comparable records began in 1995.
It comes as economists predict that the worst is over for Eurozone economies, so long as they can avoid a second wave of infections.
Governments across the continent are gradually reopening their economies. Recent indicators have suggested that things are set to slowly pick up, with businesses feeling marginally more confident in May.
Nonetheless, the second-quarter GDP figures for countries around the world are expected to be much worse than quarter one data, which only captured a few weeks of lockdown.
The European Commission, the executive branch of the European Union, has warned that Europe’s recession will be “deep and uneven” and lead to an “uncertain recovery”.
The commission predicted at the start of this month that Italian GDP would drop by a stunning 9.5 per cent this year, much worse than anything seen in the Eurozone or financial crises.
In France, Europe’s second-biggest economy, GDP is expected to fall by 8.2 per cent.
The Eurozone’s economy as a whole is expected to shrink by 7.7 per cent this year. It is then expected to grow 6.3 per cent in 2021.
EU states to debate recovery fund
EU member states are set to meet in June to discuss a “recovery fund” that will help stricken nations bounce back from the coronavirus crash.
This week, Commission president Ursula von der Leyen proposed a €750bn fund that would see the EU raise money by issuing bonds. It would then distribute €500bn as grants and €250bn as loans.
“We expect the recently unveiled EU Recovery Fund to provide a meaningful fiscal boost to the Eurozone economy,” said Nicola Mobile of Oxford Economics.
She said the grants could lift “Eurozone GDP growth in 2021 by around 1.2 per cent to 7.4 per cent”.
However, the plan faces opposition from the so-called frugal four states, the Netherlands, Austria, Sweden and Denmark. They do not want to see money given as grants to indebted southern nations such as Italy.