France and Spain both reported precipitous and worsening contractions Friday for their coronavirus-battered economies, with the Spanish economy shrinking by 18.5% and the French economy retreating by almost 14% in the second quarter when both countries were in lockdown.
Spain, however, recorded an 18.5 percent plunge in second-quarter GDP, reflecting one of the most stringent COVID-19 lockdowns in Europe which battered its key tourism industry. European Union leaders have agreed on a 750 billion-euro recovery fund backed by common borrowing to support the recovery from 2021. National governments have stepped in with loans to keep businesses afloat and wage support programs that pay workers' salaries while they are furloughed.
Federal Reserve Chairman Jerome Powell on Wednesday acknowledged the slowdown in economic activity and announced that the USA central bank is keeping interest rates near zero and will continue pumping money into the struggling economy. Excluding volatile food and energy prices, a key measure watched by the European Central Bank, inflation rose by 1.3% from 1.1% in June, Eurostat's flash estimates showed. But many job losses will wind up being permanent despite the stimulus.
"All the growth in GDP seen in the 2010-2019 decade has been wiped out in five months", said Marc Ostwald, chief economist at ADM Investor Services International.
In another hopeful sign, consumer spending - the traditional engine of the French economy - shot back above its pre-lockdown level in June, INSEE said. Cases have been rising again in several countries as people go on vacations and Britain slapped a 14-day quarantine on travellers returning from Spain.
The Spanish contraction was by far the sharpest slump since the country´s national statistics agency began collecting data. It was the largest drop on record.
The plunge in quarter-on-quarter gross domestic product (GDP) took Italy - the eurozone's third-largest economy - into recession as it had shrunk by 5.4 per cent in the first quarter.
Italy's official forecast is for a full-year GDP contraction of 8% this year, although Economy Minister Roberto Gualtieri has said this will probably have to be revised lower.
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