Eurozone plunges into double-dip recession amid third Covid wave and slow vaccine rollout

Ben Chapman
·2-min read
<p>France was one of only two EU member states to report economic growth</p> (Getty)

France was one of only two EU member states to report economic growth

(Getty)

The eurozone fell into a double-dip recession in the first three months of the year as a third wave of Covid-19 took hold and countries struggled to roll out their vaccination programmes.

The countries which use the European single currency saw their economies shrink by 0.6 per cent collectively in the first quarter of 2021. That followed a 0.7 per cent contraction in the last three months of 2020.

Across the whole EU, gross domestic product (GDP) – a measure of all goods and services produced – fell by 0.4 per cent in January, February and March compared to the same three months a year earlier.

A second successive quarter of falling GDP means the EU is in a technical recession again after partially recovering from last year’s downturn.

Europe's economic plight stands in contrast with the US, which on Thursday reported that its GDP had expanded by 1.6 per cent over the same period, or an annualised rate of 6.4 per cent.

America has vaccinated people more quickly than Europe, and Joe Biden's administration has provided a much larger stimulus package.

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The UK experienced one of the deepest recessions of any developed economy but has also seen a stronger recovery so far. GDP remained 7.8 per cent below its pre-pandemic level in February, the latest figures show.

Germany, long considered Europe's economic powerhouse, recorded a 1.7 per cent fall in GDP in the first quarter. Among the 27 EU member states, only France and Lithuania reported growth for the year.

Some signs of recovery have begun to emerge in April as European nations sped up their vaccination programmes. 

The EU expects 70 per cent of its adult population to have been inoculated by the end of the summer, which will allow easing of restrictions and a rise in business activity.

Countries more heavily dependent on tourism revenues, having taken a larger financial hit from the pandemic so far, are hoping for a boost from the return of summer holidays.

Economic analysts Pantheon said the figures confirmed a recession that had been widely forecast. 

Pantheon said the reopening of businesses would boost GDP by 4 per cent, up from the 3.5 per cent it had previously forecast.

“This number, however, is at the mercy of the pace of the still-unpredictable post-reopening rebound,” warned Claus Vistesen, Pantheon's chief eurozone economist.

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