he euro-area economy slid into a double-dip recession at the start of the year as strict coronavirus lockdowns across the region kept many businesses shuttered and consumers wary to spend. Reports from some of its biggest members show how far behind the European Union is in recovering from the pandemic amid a slow vaccine rollout. Output in the 19-nation euro area was down 0.6% in the first quarter and declined at nearly three times that pace in Germany.
In contrast, the U.S. posted annualized growth of 6.4% — fueled by a rush of household spending.
Virus Fallout
Some European economies were hampered by lockdowns in first quarter
Source: National statistics institutes
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The EU’s joint recovery fund should ultimately boost the upturn, but it won’t kick in until at least summer. The European Commission must first approve national spending blueprints, and member states still need to ratify the mechanism to raise 800 billion euros ($969 billion) of debt to finance the plans.
In the meantime, the European Central Bank is maintaining a “significantly” higher pace of bond purchases to shield the region from higher global borrowing costs that are spilling over from the faster U.S. recovery.
Key Developments
- Euro-area governments have this week been presenting stimulus plans funded by the EU’s 800 billion-euro ($969 billion) joint recovery fund
- Meaningful unlocking through May should propel a recovery in June, with downside risks, says Bloomberg Economics