Major economies in Europe suffer record contractions in Q2

PARIS/MADRID/ROME • The major European economies of France, Spain and Italy suffered record contractions in the second quarter as the impact of coronavirus lockdowns and depressed domestic consumption took its toll.

France’s economy contracted by a record 13.8 per cent in the quarter ended June, its national statistics institute Insee said yesterday.

The seasonally adjusted quarter-on-quarter drop in gross domestic product (GDP) was better than forecast but worse than the performance of most of its euro zone peers.

“GDP’s negative developments in the first half of 2020 is linked to the shutdown of ‘non-essential’ activities in the context of the implementation of the lockdown between mid-March and the beginning of May,” Insee said.

The second-quarter figure means the French economy has been shrinking for three consecutive quarters and continues to be in recession.

Spain plunged into recession after its GDP tumbled by 18.5 per cent, official figures yesterday showed. In the first quarter, growth had fallen by 5.2 per cent, said the country’s Institute of National Statistics.

The business, transport and hotel sectors were all badly hit, suffering a 40 per cent drop compared with the first quarter. And tourism, a pillar of the Spanish economy and which accounts for 12 per cent of its GDP, suffered a 60 per cent drop in revenues compared with the same period last year.

According to Spain’s Economy Minister Nadia Calvino, the measures taken by the government to prop up the economy – such as extending its furlough scheme, state-sponsored loans and subsidies for the self-employed – enabled the country to avoid “a collapse in GDP of more than 25 per cent”.

Similarly, Italy slipped into recession as the country’s national statistics bureau Istat yesterday reported a 12.4 per cent fall in GDP for the second quarter. GDP fell by 17.3 per cent compared with the year-ago second quarter, Istat said, as the coronavirus lockdown took a dramatic toll on the euro zone’s third-largest economy.

The three countries suffered sharper GDP shocks compared with the record 10.1 per cent fall in Germany.

Austria suffered a 10.7 per cent contraction and Belgium 12.2 per cent. Portugal also reported yesterday that its GDP shrank 14.1 per cent in the second quarter, marking the biggest contraction ever recorded.

A historic €750 billion (S$1.2 trillion) rescue plan was agreed to by the European Union’s 27 member states on July 21 to help the bloc bounce back from the pandemic-induced recession.

Earlier this week, European Commission president Ursula von der Leyen said in an op-ed carried by German newspaper Handelsblatt that the deal was “historic”, in terms of the size of the recovery package, the way the money will be raised and how the money will be repaid.

REUTERS, AGENCE FRANCE-PRESSE

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