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Friday, April 16, 2021

Europe’s economy fell again at year-end, pressuring governments

The EU economy turned down again in the fourth quarter, declining 0.5 percent in an official estimate that keeps up pressure for government spending.

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For the euro countries, the quarterly drop was 0.7 percent compared to gross domestic product over the previous three-month period, according to Eurostat’s flash estimate Tuesday.

For 2020 in full, the eurozone suffered the worst decline in its history, according to the EU statistical agency. GDP fell 6.8 percent, dwarfing the 4.5 percent drop in 2009 during the financial crisis. For the EU as a whole, the estimated annual decline was 6.4 percent.

Hopes for a rebound sparked by growth in the third quarter were dashed by the latest flareup of the pandemic. This year, delays in the administration of vaccine are raising risks of longer-lasting troubles. The European Central Bank’s Christine Lagarde said she expects the end-of-year lockdown measures to be felt into the first quarter of this year — raising the prospect of a double-dip recession, which worries economists over permanent scarring effects such as business failures.

The quarterly decline in any case will press governments to maintain unprecedented level of support for their economies. Countries including Spain, Belgium, Italy and France already face projected budget deficits well beyond EU rules.

All EU countries had lower economic output last quarter than in the same period a year earlier, Eurostat reported. Austria, Italy and France saw the biggest declines compared to the third quarter. The preliminary estimates could still be revised.

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This article is part of POLITICO’s premium policy service: Pro Financial Services. From the eurozone, banking union, CMU, and more, our specialized journalists keep you on top of the topics driving the Financial Services policy agenda. Email [email protected] for a complimentary trial.

(Except for the headline, this story has not been edited by WCT staff and is published from a syndicated feed.)

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