Europe’s major economies have started counting the costs for growth since the coronavirus crisis – as leaders across the continent struggle to reach an agreement on how to mitigate its impact.
The French central bank said it entered a recession with an estimated 6% contraction in GDP in the first quarter of the year, while forecasts also predicted a severe recession for Germany.
But a 16-hour meeting between European leaders that lasted overnight until Wednesday morning failed to reach an agreement on how to help the eurozone cope with the damage.
The Bank of France’s estimate of the magnitude of the recession in the January-March period comes after the economy shrank by 0.1% in the fourth quarter of 2019 – and two quarters in a row of decline meet the definition of recession.
France it has been blocked As of March 17, the central bank estimates that every two weeks, based on residence orders, they could reduce annual economic activity by 1.5 percentage points.
Meanwhile Germany, Europe’s largest economy, is expected to decline 4.2% this year, according to a report by the country’s leading meteorologists.
However, European leaders remain deadlocked on how to save families and businesses across the continent from bankruptcy.
A videoconferencing meeting between 19 eurozone finance ministers stopped due to differences in aid conditions and the proposal to issue common bonds to pay for the crisis.
Talks were due to resume on Thursday.
On the table is a € 500 billion package, partly made up of € 240 billion in emergency loans from the current European Stability Mechanism (ESM).
But Italy, which was the epicenter of the crisis in Europe, refused the use of the ESM.
This is because the conditions for implementing economic reforms arise, raising the specter of the harsh austerity imposed on Greece during the Eurozone debt crisis almost a decade ago.
Italy says it makes ESM the wrong tool to deal with the fall from the coronavirus crisis, as it is not the fault of any country
Germany proposed to give up most of the cash conditions, but the Netherlands pushed for reform promises.
German Finance Minister Olaf Scholz said countries are close to an agreement on bailout loans and other parts of the package – which covers credit guarantees to keep companies afloat and support to help companies avoid layoffs .
He said that the position of Germany and other countries is that loans should have minimum conditions and “should not mean that, as happened 10 years ago, commissioners or a troika go to the countries and develop a long-term program”.
Italy, supported by France, Spain and six other countries, had pushed to go even further than using the MES and relied on a shared bond issue supported by all countries to raise funds at low interest rates and favorable conditions such as a long refund.
But Germany and the Netherlands I resisted common indebtedness.