The eurozone is preparing for the worst and does not exclude the possibility of a deeper recession amid the coronavirus pandemic. Given the extent of the ongoing Covid-19 epidemic, the euro area will most likely face greater economic problems compared to other countries. At the moment, it is difficult to predict the future course of events. Everything will depend on how long the quarantine restrictions are going to last. In case of a drawn-out battle against the coronavirus, the economic consequences for the eurozone may be devastating. According to Luis de Guindos, the Vice President of the European Central Bank, in the most likely scenario, the economic activity in the euro area can show some signs of growth in the third quarter of 2020. However, a genuine recovery in the economy is expected only in 2021. In any case, 2021 will not be able to make up for all of the downturn in 2020. Even with an unprecedented 1 trillion euros stimulus package announced by the regulator, the eurozone has little chance of a quick economic recovery. Apart from that, the economy may require additional monetary injections even after the pandemic is past its peak. Taking into account all these measures, Europe is better equipped to respond to this unprecedented crisis, says Luis de Guindos. The eurozone member countries are likely to experience a more severe recession which will have a huge impact on their public finances. Against this background, the additional government spending is expected to be as high as 1-1.5 trillion euros, an amount the eurozone has probably never seen before.
