Eurozone suffers worst GDP drop on record

In the second quarter of 2020, the eurozone suffered its worst ever economic contraction, with GDP falling by 12.1 per cent according to preliminary data from the European Union’s statistics office.

The record plunge can be attributed to the unprecedented lockdown measures imposed by all the governments comprising the economic bloc. With hundreds of millions of Europeans forced to stay at home and border restrictions popping up throughout the usually borderless area, the eurozone’s leading economies shrank significantly.

Spain suffered the worst decline in gross domestic product, sinking by 18.5 per cent. France, Italy and Germany likewise suffered two-digit decreases, falling by 13.8, 12.4 and 10.1 per cent respectively.

Beyond the 19-member group which shares the euro, the 27-member states within the European Union suffered an 11.9 per cent contraction, on the whole.

The EU's Eurostat office has warned that its sources for the recent figures were "incomplete and subject to further revisions". However, few doubt that the finally adjusted data will also show a historic contraction.

Not only has the ongoing health crisis caused the largest GDP plunge in the EU’s 25-year history but it has also resulted in the largest contraction in the German economy since it began keeping quarterly records in 1970.

With even the traditional powerhouse of the eurozone severely affected, the economic and monetary union faces a hard road to recovery. The €750bn coronavirus recovery fund agreed by European leaders last week will drive much of this comeback.

With lockdowns easing, economic sentiment has witnessed a sharp rebound. In both France and Germany, retail sales and manufacturing capacity utlisation have almost returned to pre-crisis levels.

At the end of Friday trading, the pan-European Euro Stoxx 50 & 600 closed down 1.06 and 0.89 respectively. Despite a slew of stimulus and central bank action, both indices stand more than 14 per cent below their 2020 starting level.

The euro traded down 0.22 per cent against the US dollar but was up 0.76 per cent against the Japanese yen.

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