Covid-19 slump will push EU into a recession of ‘historic proportions’ wiping 7.7% off growth
Europe faces a recession of ‘historic proportions’ as Covid-19 cripples economies, according to forecasts published by Brussels.
In a devastating report on the outbreak, the European Commission has estimated output in the eurozone will decline by 7.7 per cent this year.
‘Europe is experiencing an economic shock without precedent since the Great Depression,’ said Paolo Gentiloni, European Commissioner for the economy.
Paolo Gentiloni, European Commissioner for the economy said: ‘Europe is experiencing an economic shock without precedent since the Great Depression
It came as analysts said a German court ruled that the European Central Bank’s £2trillion emergency bond buying programme to prop up the eurozone violated the country’s constitution.
Experts believe the decision challenges the supremacy of the Luxembourg-based European Court of Justice and sets a precedent for future challenges by eurosceptics.
German bond ruling
Germany’s top court has challenged the European Central Bank (ECB) stimulus scheme, sparking a row that threatens the EU’s economic response to the crisis.
Constitutional court judges have ordered Germany’s central bank, the Bundesbank, to stop participating in the £2trillion bond-buying programme unless the ECB provides evidence within three months to support it.
They dismissed previous legal rulings on the scheme by the European Court of Justice as ‘not comprehensible’. In Germany, critics claim the ECB is overstepping its mandate.
Luis Garicano, a liberal Spanish member of the European Parliament, said: ‘Europe cannot work if national constitutional courts decide unilaterally when the Luxembourg court has primacy.’
The Commission’s economic forecast warned of a painful slump that poses a threat to the region.
The report said: ‘Despite the swift and comprehensive policy response at both EU and national level, the EU economy will experience a recession of historic proportions this year.’ Greek GDP will contract most, by 9.7 per cent.
Italy will have the second deepest recession – 9.5 per cent – and Spain will fall 9.4 per cent. UK output is expected to fall 8.3 per cent. The eurozone is then forecast to grow by 6.3 per cent next year.
Gentiloni said recovery was likely to be uneven across Europe, adding: ‘Such divergence poses a threat to the single market and the euro area – yet it can be mitigated through decisive joint action.’