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The eurozone is experiencing a double-dip decline as the epidemic continues

Euro sign in the ECB building in Frankfurt, France on April 24, 2020

Euro sign in Frankfurt, ECB building, Germany, April 24, 2020

The eurozone economy is in recession as the effects of the epidemic continue to hit activity.

European economies have fallen behind this year with a new wave of infections and restrictions on the throat.

In January-March, the eurozone fell by 0.6%, the second consecutive decline, which is the most widely used definition of recession.

This is the second such episode since the beginning of the epidemic, the so-called double-dip decline.

However, of the national economies reported so far, only Italy has repeated this example.

Other countries have seen some growth in the last two quarters or so.

In the first three months of this year, the French economy grew by 0.4% after the last recession of 2020, although the return was described by the National Statistics Agency as “limited”.

In Germany it was the opposite. Some increase in the fourth quarter of last year, և a sharp decline of 1.7%, according to the latest data.

There were some specific factors that could affect Germany.

Klaus Vistessen, a Pantheon macroeconomist, says the economy has been shaken by rising value-added tax (VAT), which has led to falling construction costs.

In Germany, the reduction of temporary VAT, which was intended to support the economy in the event of an epidemic, ended at the end of the year.

Andrew Cunningham of Capital Economics pointed to supply disruptions that hit Germany’s major manufacturing sector, especially the automotive industry.

The bigger picture is the region where economic activity has declined again due to the spread of the virus and restrictions on its prevention.

The numbers are particularly grim in the case of Italy, where the economy is still 6.6% smaller than at the end of 2019, before the epidemic.

He says the economic damage is less severe at this stage of the health crisis. Recently, economic activity in the eurozone was 11% higher than in the second quarter of last year.

This supports the idea that businesses have found ways to reduce the impact that restrictions have on what they do, although for some the impact is still severe.

Looking ahead, this weak performance is expected to improve as vaccination programs allow to limit further restrictions and promote consumer confidence. This is especially true in southern Europe, where many businesses need to revitalize tourism.

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