Coronavirus and quarantine plunged the European economy — the second largest in the world after the us — in the deepest crisis in its entire postwar history. The worst expectations are met: the European Union is getting poorer faster than the rest of the world.
the EU is more other in the West suffered from a coronavirus and introduced a most rigid quarantine. Now he is reaping the fruits of the epidemic. According to recent Eurostat figures, the EU economy decreased by 3.5% in the first three months 2020.
the Results of the first quarter — only a hint of the future destruction. Widespread quarantine has bound the EU only in March, and the main blow at the pockets of citizens and business have for the current second quarter. If the virus will retreat in the second half of the year and the economy begins to recover, the total damage will be even more significant.
the European Central Bank admits that the fall in GDP for the year will reach 12% in countries of Euro. The Eurozone consists of 19 of the 27 countries of the European Union and account for 85% of the EU economy, or 12 trillion of the 14 trillion Euro of total GDP.
“the Speed and depth of economic decline unprecedented in peacetime, — said the head of the Central Bank, Christine Lagarde. — The scale of the recession will depend entirely on how long the quarantine and how successful will be the support of people and business.”
the Short answer is: due quarantine. To understand how quarantine affects a key measure of economic success in the postwar world — GDP, need to remember how it is calculated.
the Total GDP is the sum of consumption, investment, government spending and net exports in a particular country. In most countries the overwhelming role in the growth of GDP plays the first component is consumption.
it struck the quarantine. People sit at home, earn less and spend less, shops and restaurants boarded up, forbidden tourism and events — sports and entertainment. Even the guests with the gifts can not walk.
All of this reduces the consumption. In France, for example, it declined 6% for the first quarter.
But the decline was twice as substantial — minus 12%. Business is not invested in the development, people are not buying homes, the company does not create reserves. Part of the investment is pending, the other lost forever — during the quarantine in the absence of income funds, deferred for large purchases and expansion will be eaten.
the Two main components of GDP of developed countries, thus dragging the economy down. In terms of restrictions to keep her on a ventilator until better times, maybe the third component is government spending.
They increase the benefits paid from the Treasury of the salaries of the private sector, handing out cash to the entire population, incentives and subsidies — bi��bear. Not to mention the extraordinary expenditure actual pandemic: the purchase of medical equipment, repatriation of citizens, construction of temporary hospitals, and the development of drugs and vaccines.
the United States wrote to the anti-crisis measures is already more than $ 3 trillion, Europe — nearly 2 trillion, but in General, according to the preliminary estimates of the IMF, government support has already been promised to 8 trillion dollars. This is about a tenth of the world GDP.
the crisis is only beginning, and already several times more.
the world’s Largest political Union, with a population of 450 million people suffered more than others. The EU accounted for almost half of all associated with the pandemic Covid-19 deaths.
In the USA — the world economy — coronavirus came later and hurt her not yet so much.
Us GDP fell 1.2% QoQ compared with a fall of 3.5% in the EU. If extrapolated for the whole year, as is customary for statisticians in the United States, the annual rate of decline of the European economy in the first quarter exceeded 13%, while America was limited to a modest 4.8 per cent.
At the end of the year Europe will further lag behind competitors. According to the International monetary Fund, the collapse in the European Union (minus 7%) would be greater than in the US (-6%) and Japan (-5%), and competitor of the EU in the fight for the title of world’s second largest economy — China altogether will avoid falling (+1,2%).
Coronavirus disabled the motor of the European economy. Of the four giants little blood managed only to Germany, whereas France, Italy and Spain were the leaders and deaths, and the duration and severity of the quarantine.
In the end, with the average reduction rate of 3.5% French GDP fell by 5.8%, Spain 5.2%, and Italy — 4.7%, and for Italians this is the second consecutive quarter of decline, that is technically the country was in recession.
data from Germany is expected only in mid-may, but German officials have warned that nothing good largest European economy is not waiting, and the recession will be the worst in the postwar years.
Alexey Kalmykov
