The coronavirus pandemic costs many countries around the world hundreds of billions of dollars. Measures aimed at combating the spread of COVID-19 are putting a massive burden on their federal budgets. Even the wealthiest nations, that are closely monitoring the size of their debts, have to take loans.
As a result, the pandemic, which requires sufficient public funding, has forced the euro area to go into crippling debts. The overall debt burden of 19 European countries is about to exceed the total size of the eurozone economy in 2020. According to the European Commission, this forecast can be considered as a fait accompli. If the EU authorities continue to borrow money, the ratio of public debt to gross domestic product across the euro area is likely to rise to 101.7% by the end of the year from 85.9% in 2019. Assessing the economic prospects for the region in 2021 and 2022, the European Commission believes that government debt will hardly fall below 100% of GDP. As stated in a report, the negative economic impact of the pandemic could be more severe in terms of sluggish growth and higher unemployment rates than assumed in this baseline scenario.
The European Commission expects the EU economy to contract by 7.4% before recovering by 4.1% in 2021. In addition, it predicts that the global economy will shrink by 3.8% rather than by 2.9%.
