EU Forecasts 'Historic' 7.7 Percent Eurozone Recession

The European Commission said Wednesday the eurozone economy would contract by a staggering 7.7 percent in 2020, as the catastrophic consequences of the coronavirus outbreak sweep through the continent.

Calling it a "recession of historic proportions", the EU's executive said the 19-member single currency zone would rebound by 6.3 percent in 2021, but in an uncertain recovery that would be felt unevenly across the continent.

That question is pressing, amid gripes by Italy and Spain that wealthier Germany and the Netherlands have the means to swiftly turbocharge their own recoveries, lessening their enthusiasm for measures to help the south.

The commission's data seemed to confirm this concern, with Italy seeing a cataclysmic recession of 9.5 percent in 2020, and only a 6.5 percent recovery next year to make up the ground.

Greece's recession would reach an eye-watering 9.7 percent, wiping out all the gains of its post-bailout recovery, and only pull back by 7.9 percent in 2021, the commission said. 

The recovery meanwhile would be much healthier in Germany's economy, Europe’s economic powerhouse, which was predicted to sink by 6.5 percent in 2020 and recover 5.9 percent in 2021.

The effects on public finances in heavily indebted Italy would be particularly bad, with the annual deficit soaring to 11.1 percent of annual output, and with Spain and France overspending by 10 percent. 

The EU limit is normally three percent.

"Europe is facing an economic shock without precedent since the Great Depression," said European Economic Commissioner Paolo Gentiloni, referring to the aftermath of the 1929 financial crash.