Video: Euro zone faces deeper recession, slower recovery

The European Commission says the euro zone faces a deeper recession and then a slower recovery than it previously forecast.

Editor’s note:
The following is a transcript of the accompanying video. ©2020 Thomson Reuters.

The euro zone is emerging from lockdown, with shops and services reopening. But the European Commission says it’s all going more slowly than expected. And that has economic consequences.

On Tuesday [7 July] the Commission said the region faces a deeper recession and then a slower recovery than previously thought. GDP in the single currency area is predicted to shrink by a record 8.7% this year instead of the 7.7% forecast earlier. And it will only bounce back by 6.1% in 2021, down from 6.3%.

The Commission says countries hardest hit by the pandemic will suffer the worst downturns, too. It says France, Italy, and Spain will all see contractions of more than 10%.

Germany, though, looks like a different story. Widespread testing there helped to limit the number of fatalities. The Commission says its 2020 slowdown will be 6.3% — slightly less than predicted earlier. Other data [published on] Tuesday added to signs of recovery there. German industrial output rebounded 7.8% in May, with production of capital goods up by more than a quarter.

But plenty of risks lie ahead. The Commission says a second wave of infections, or the failure of Brexit trade talks, could yet see the euro-zone forecasts cut again.