Eurozone faces deep economic crisis after its worst quarter ever

The euro area is suffering its worst contraction ever as data published on Thursday showed that the region’s gross domestic product (GDP) shrank by 3.5 percent in the first quarter of 2020 versus the final quarter of last year.

Economic output in the 19 countries that use the euro sank by 3.8 percent in the January to March period.

“These were the sharpest declines observed since [the] time series started in 1995,” the EU statistics (Eurostat) office said. The fall is expected to deepen in the second quarter as much of the region has been in coronavirus lockdown for the whole of April. 

Data showed that Italy joined France in recession, after GDP shrank by 4.7 percent in the first quarter of 2020, its worst slump in decades. Belgium’s GDP dropped 3.9 percent, while Austria was down by 2.5 percent. Germany slashed its GDP forecast for 2020 to -6.3 percent from a January estimate of 1.1 percent, with authorities saying the country is on track for the worst recession since World War II.

European Central Bank (ECB) President Christine Lagarde said at a press conference on Thursday that “the euro area is facing an economic contraction of a magnitude and speed that are unprecedented in peacetime.”

She added that the central bank expects a GDP contraction between five percent and 12 percent this year. The ECB said that it had kept interest rates unchanged but was ready to increase its coronavirus stimulus program if needed, as the eurozone faces a deep economic crisis.

Eurostat showed that the unemployment rate rose to 7.4 percent in March from 7.3 percent in February.

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