London Daily

Focus on the big picture.
Thursday, Jul 10, 2025

European economy will suffer serious damage from restrictions

European economy will suffer serious damage from restrictions

The European economy, which has been hit again by restrictions aimed at containing the spread of the coronavirus, faces a slow recovery next year, leaving it exposed to an increase in the number of companies going bankrupt and long-term unemployment.
The European Commission said the euro-area economy will grow 4.2% in 2021, less than previous anticipated. It sees a shallower recession this year, though that doesn’t include the latest government lockdowns, which could push some of the region’s biggest economies back into recession.

“Europe’s rebound has been interrupted due to the resurgence in Covid-19 cases,” Paolo Gentiloni, EU commissioner for the economy, said in a statement. “In the current context of very high uncertainty, national economic and fiscal policies must remain supportive.”

Governments, which for months resisted imposing fresh lockdowns, were forced to take dramatic action in recent weeks and impose strict curbs on hospitality, retail and travel. They’re pumping in more aid to help businesses get through the disruptions, but the risk that things might get even worse is still large.

The commission warned that the pandemic could leave “deeper scars” than forecast, “primarily from higher numbers of corporate bankruptcies and hysteresis effects on labor markets.”

It also warned that member states could follow “rather different growth trajectories” depending on the structure of their economies. Spain’s is forecast to contract by more than 12% this year, the biggest hit in the currency bloc and more than previously anticipated. That compares with a euro-area average of -7.8%.

The commission also sees a double digit contraction in the U.K. The forecasts for the first time assume that negotiations on a post-Brexit trade accord will yield no result.

Job losses in the euro area have so far been contained by government measures including furlough programs, but the commission said unemployment will probably rise to 9.4% next year as emergency support is phased out.

Due to unprecedented fiscal support, government debt in the currency bloc will jump to more than 100% of economic output this year and remain above this threshold through 2022, according to the forecast. Greece’s debt load will rise to an eye-watering 207%.

Amid the ongoing damage to the economy, businesses and livelihoods, the European Central Bank is preparing a new set of stimulus measures. Even before the latest spike, inflation was forecast to rise to just 1.3% in 2022, far below the institution’s goal of just under 2%.

The ECB will have its own new forecasts at its policy meeting in December, and Vice President Luis de Guindos said Thursday they’re unlikely to differ much from the commission projections. He added that the evolution of the pandemic continues to be a source of uncertainty.

Diplomats and lawmakers in Brussels are meanwhile still squabbling over the details of a historic joint fiscal response to the EU’s deepest slump on record.

The ECB has pushed officials to agree on the plan without any delay. It said that the latest lockdowns will require new fiscal support to sustain demand and help out those who are directly affected by the closures in the affected business sectors.
Newsletter

Related Articles

0:00
0:00
Close
Severe Heatwave Claims 2,300 Lives Across Europe
NVIDIA Achieves Historic Milestone as First Company Valued at $4 Trillion
Declining Beer Consumption Signals Cultural Shift in Germany
Linda Yaccarino Steps Down as CEO of X After Two Years
US Imposes New Tariffs on Brazilian Exports Amid Political Tensions
Azerbaijan and Armenia are on the brink of a historic peace deal.
Emails Leaked: How Passenger Luggage Became a Side Income for Airport Workers
Polish MEP: “Dear Leftists - China is laughing at you, Russia is laughing, India is laughing”
BRICS Expands Membership with Indonesia and Ten New Partner Countries
Weinstein Victim’s Lawyer Says MeToo Movement Still Strong
U.S. Enacts Sweeping Tax and Spending Legislation Amid Trade Policy Shifts
Football Mourns as Diogo Jota and Brother André Silva Laid to Rest in Portugal
Labour Expected to Withdraw Support for Special Needs Funding Model
Leaked Audio Reveals Tory Aide Defending DEI Record
Elon Musk Founds a Party Following a Poll on X: "You Wanted It – You Got It!"
London Stock Exchange Faces Historic Low in Initial Public Offerings
A new online platform has emerged in the United Kingdom, specifically targeting Muslim men seeking virgin brides
Trump Celebrates Independence Day with B-2 Flyover and Signs Controversial Legislation
Boris Johnson Urges Conservatives to Ignore Farage
SNP Ordered to Update Single-Sex Space Guidance Within Days
Starmer Set to Reject Calls for Wealth Taxes
Stolen Century-Old Rolls-Royce Recovered After Hotel Theft
Macron Presses Starmer to Recognise Palestinian State
Labour Delayed Palestine Action Ban Over Riot Concerns
Swinney’s Tax Comments ‘Offensive to Scots’, Say Tories
High Street Retailers to Enforce Bans on Serial Shoplifters
Music Banned by Henry VIII to Be Performed After 500 Years
Steve Coogan Says Working Class Is Being ‘Ethnically Cleansed’
Home Office Admits Uncertainty Over Visa Overstayer Numbers
JD Vance Questions Mandelson Over Reform Party’s Rising Popularity
Macron to Receive Windsor Carriage Ride in Royal Gesture
Labour Accused of ‘Hammering’ Scots During First Year in Power
BBC Head of Music Stood Down Amid Bob Vylan Controversy
Corbyn Eyes Hard-Left Challenge to Starmer’s Leadership
London Tube Trains Suspended After Major Fire Erupts Nearby
Richard Kemp: I Felt Safer in Israel Under Attack Than in the UK
Cyclist Says Police Cited Human Rights Act for Riding No-Handed
China’s Central Bank Consults European Peers on Low-Rate Strategies
AI Raises Alarms Over Long-Term Job Security
Saudi Arabia Maintains Ties with Iran Despite Israel Conflict
Musk Battles to Protect Tesla Amid Trump Policy Threats
Air France-KLM Acquires Majority Stake in Scandinavian Airlines
UK Educators Sound Alarm on Declining Child Literacy
Shein Fined €40 Million in France Over Misleading Discounts
Brazil’s Lula Visits Kirchner During Argentina House Arrest
Trump Scores Legislative Win as House Passes Tax Reform Bill
Keir Starmer Faces Criticism After Rocky First Year in Power
DJI Launches Heavy-Duty Coaxial Quadcopter with 80 kg Lift Capacity
U.S. Senate Approves Major Legislation Dubbed the 'Big Beautiful Bill'
Largest Healthcare Fraud Takedown in U.S. History Announced by DOJ
×