EU: Economic contraction will be worse than expected

The European Union is predicting the bloc’s economy will contract more than initially expected due to coronavirus-related lockdowns as their summer economic forecast paints a significantly grimmer picture than their spring forecast did.  

According to the latest predictions released Tuesday, the 27-nation EU’s economy will contract by 8.3 percent this year, followed by 5.8 percent growth in 2021. Their spring forecast, released in early May, predicted a 7.5 percent economic contraction this year, followed by 6 percent growth in 2021.

The 19 EU nations that use the euro as their currency are predicted to see a record economic decline of 8.7 percent this year, and growth of 6.1 percent in 2021. In May, a 7.8 percent drop was expected for that group in 2020, followed by 6.3 percent growth next year.

The EU said the economic forecast dropped more than initially expected this year because “the lifting of lockdown measures is proceeding at a more gradual pace than assumed” in the spring. 

EU Economy Commissioner Paolo Gentiloni urged the commission to quickly reach an agreement on the 750 billion-euro stimulus package proposed earlier this year. 

“The policy response across Europe has helped to cushion the blow for our citizens, yet this remains a story of increasing divergence, inequality and insecurity,” Gentiloni said in a statement. “This is why it is so important to reach a swift agreement on the recovery plan proposed by the Commission – to inject both new confidence and new financing into our economies at this critical time.”