Euro­zone braced for record 15.6pc plunge in growth af­ter dam­ag­ing lock­down pe­riod

The Daily Telegraph - Business - - Business - By Rus­sell Lynch

THE scale of the eco­nomic car­nage un­leashed across the euro­zone by Covid-19 lock­downs will be laid bare this week as ex­perts brace for a record­break­ing col­lapse in growth.

City economists fore­cast a dra­matic 15.6pc plunge in growth be­tween April and June, four times deeper than the 3.6pc slide in the first quar­ter, which was it­self a record for the 19-mem­ber cur­rency bloc.

The over­all slump will dis­guise vary­ing for­tunes, with Ger­many far­ing best. The euro­zone’s big­gest econ­omy im­posed less re­stric­tive mea­sures than other mem­ber states and has a big­ger man­u­fac­tur­ing sec­tor less vul­ner­a­ble to shut­downs. Peter Schaf­frik, head of eco­nomic re­search at in­vest­ment bank RBC, said: “The way the lock­down op­er­ated is that the na­tions which had a larger share of ser­vices like France were af­fected more. That is one of the rea­sons why Ger­many comes out slightly bet­ter.”

Weaker na­tions such as Greece, Spain and Por­tu­gal are par­tic­u­larly ex­posed due to their higher re­liance on tourism, which came to a halt as the pan­demic struck and is set to suf­fer another hit as fears grow of a sec­ond wave, par­tic­u­larly in Spain. Tourism ac­counts for 14pc of Greece’s econ­omy and 12pc in Spain and Por­tu­gal, in­vest­ment bank Jef­feries said.

Ox­ford Eco­nom­ics ex­pects Ger­man growth to re­treat by a “rel­a­tively be­nign” 9pc, with France suf­fer­ing a 16pc fall and Spain the big­gest ca­su­alty in the re­gion with an 18pc col­lapse.

An­gel Talav­era, Ox­ford’s head of Euro­pean eco­nom­ics, said: “Fail­ure to con­trol the epi­demic would be a ma­jor blow for the re­cov­ery ex­pected dur­ing the sum­mer months, espe­cially in coun­tries highly re­liant on tourism.”

Although more timely data shows some signs of a pri­vate sec­tor re­cov­ery in July, re­tail spend­ing has tailed off, and fi­nan­cial data firm IHS Markit has warned of a slump in em­ploy­ment across the euro­zone. The Euro­pean Cen­tral Bank has launched a €1.35 tril­lion (£1.23 tril­lion) money-print­ing cam­paign and is of­fer­ing cheap loans to banks. Politi­cians agreed a €750bn res­cue fund to help the worst af­fected coun­tries af­ter a sum­mit last week.

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