Eurocrats have said the meltdown from the deadly virus could be similar to the 2009 financial crisis, during which member states’ national debts spiralled dangerously out of control. Meanwhile, a think tank said the world was facing its worst one-year drop in GDP since 1931. In a statement, the European Commission said: “Assuming an extension of the health crisis up to the beginning of June or beyond, the fall in economic activity in 2020 could be comparable to the contraction of 2009, the worst year of the economic and financial crisis.” Officials have been to forced to row back on previous predictions, warning their forecast of a one percent economic contraction was too optimistic.
They said “developments since” their last calculations point to a much more grim scenario for the bloc.
Instead the Commission now believes the Eurozone’s output will shrink by two percent, if the bloc-wide lockdown continues for just one month, and by five percent if it remains in place for three months.
The Centre for Economic and Business Research think-tank has warned the next challenge for the global economy is to stop the pending recession “FROM TURNING INTO A 1930s style rout”.
Their report said: “We estimate that world GDP will fall by at least four percent this year, clearly with a huge margin of error. If this is correct, the fall will be more than twice as large as in 2009 during the financial crisis and will be the largest drop in GDP in one year since 1931 other than in years affected by war.”
On Europe, it predicts that Italy, Spain and Germany will be amongst the world’s worst-hit economies.
The report adds: “The biggest falls in GDP this year in the major economies are predicted to be in Italy (11 percent), Brazil (eight percent), Germany (eight percent) and Spain (eight percent).”
This has prompted the EU to roll out a series of drastic measures in a desperate bid to attempt to keep its ailing economy afloat.
On Friday evening, the Commission unveiled plans to trigger its “general escape clause”.
The unprecedented move suspends many of the bloc’s fiscal rules that are designed to keep irresponsible governments under budgetary control.
After taking the drastic action, EU Commission President Ursula von der Leyen said: “This is new and never done before.”
MUST READ: Coronavirus symptoms: New symptom of deadly virus
She added: “The state aid rules that we have in place since yesterday are the most flexible ever.
“And we will do more to support you and your family through this crisis.”
Paolo Gentiloni, the EU’s economy chief, said: “We have already made clear that governments can spend what they need to tackle this emergency.
Coronavirus tragedy: OAPs no longer given respirators, warns doctor [INSIGHT]
Coronavirus map LIVE: Boris prepares dramatic new laws [MAP]
Up to one third of infected people are ‘silent carriers’ of COVID-19 [INSIGHT]
“These are not normal times and there can be no business as usual.”
European capitals will now be allowed to spend their way out of trouble with the bloc’s tough deficit rules now relaxed.
“National governments can pump money into the economy as much as they need,” according to Mrs von der Leyen.
Source: Read Full Article