France and Italy dragged Europe into a new economic contraction in the last quarter of 2020. Even so, in that period the EU performed better than analysts expected. The Union as a whole registered a 0.4% fall in the final part of the year, while the euro zone fell 0.6%. Those are the two data provided by the Eurostat statistical office, which this Tuesday improved by one tenth the advance made at the beginning of the month. Spain, which held up in green numbers, experienced in the fourth quarter the biggest drop in relation to the same period of 2019, of 9.1%.
Brussels expects the EU to make a hiatus in its comeback and enter a recession at the end of this quarter. The first step already took place in the latter part of the year. The strong restriction measures (from closures of all the restaurants to curfews) decreed by Paris, Rome or The Hague to contain the second wave of infections ended up taking its toll on economic activity. As a result of these decisions to curb infections, Austria’s GDP contracted by 4.3%; that of Italy, 2%; that of France, 1.3%; that of Poland, 0.7%, and that of the Netherlands, 0.1%.
The Commission believes that a good part of these measures should be extended until the most vulnerable population has been vaccinated. From then on, Brussels assumes that the de-escalation will begin. And that should happen next quarter, with all the questions posed by the pandemic and raised on Monday by the European Center for Disease Control and Prevention (ECDC, for its acronym in English). The community body warned about the danger posed by the new variants and anticipated months of restrictions ahead. The economic forecasts of Brussels, which exude a certain optimism, concentrate the bulk of that recovery in the third quarter of 2021. And the country that must grow the most is Spain, which was the one that fell the most as a result of the pandemic with a collapse of GDP, in year-on-year terms, 9.1%.
The tough restrictions imposed on economic activity did not, however, prevent Germany, Belgium, Spain or the Czech Republic from continuing to grow in the last quarter of the year. In some countries, the rebound continued with expansions of over 1% (Cyprus, Latvia, Lithuania, Hungary, Bulgaria) and even 5%, as in the case of Romania. Brussels believes that these data suggest that the EU is being able to adapt to circumstances, especially industry. However, all countries closed the year negative. The same was not the case with employment, which grew again for the second consecutive quarter by 0.3%, according to Eurostat, thanks to public plans for the temporary protection of jobs and incentives launched by governments.
In the midst of a debate on the international role of the euro, which the Eurogroup again addressed on Monday, the EU saw the United States and China set the pace of recovery again. The dynamics before the pandemic are reproducing again: on the other side of the Atlantic, the economy grew 1% in the final part of the year, while the Asian giant grew 6.5%. The EU trusts that the recovery plan, baptized as Next Generation EU, will be the catalyst for its GDP to give the acceleration necessary to quickly return to levels prior to the pandemic and cause a great economic transformation that closes this differential with its competitors more direct.