Lockdowns Battered The Eurozone Economy in Q2

PARIS, KOMPAS.com — The Eurozone economy shrank by a staggering 12.1 percent in the April-June period compared to the first quarter of 2020.

The latest economic performance of the 19-country Eurozone is the largest drop on record though not surprising.

Eurozone countries and that of other EU member-states were forced to shut businesses followed by a battering in consumer spending.

Economists believe that the Eurozone has passed the worst of the downturn as strict lockdown restrictions have been lifted in nearly all the EU including Eurozone countries.

However, the recovery is still highly vulnerable to renewed Covid-19 virus outbreaks.

Spain, which along with Italy was among the first to get hit hard by the spread of the virus, suffered the region's heaviest drop at 18.5 percent.

France, Italy, and Portugal also endured steep declines, but no country escaped the impact of the pandemic.

For the currency union as a whole it was the biggest decline since the records started in 1995. The broader 27-country European Union, not all of whose members use the euro, saw output sag 11.9 percent.

The decline in Europe compares with a 9.5 percent quarter-on-quarter drop in the United States, which unlike Europe has not yet been able to get its contagion numbers firmly down yet and whose economic recovery is in doubt.

European governments are countering the recession with massive stimulus measures.

EU leaders have agreed on a €750 billion recovery fund backed by common borrowing to support the economy from 2021.

Read also: EU Leaders Seal the Deal on $2.1 Trillion Coronavirus Recovery Fund

National governments have stepped in with loans to keep businesses afloat and wage support programs that pay workers' salaries while they are furloughed.

The European Central Bank is pumping €1.35 trillion in newly printed money into the economy, a step which helps keep borrowing costs low.

Those support measures have helped keep unemployment from spiking. The rate rose to 7.8 percent in June from 7.7 percent in May.