Many states experience a spike in the budget deficit during the global crisis. European countries are no exception. The coronavirus pandemic has seriously shattered the EU budget. Sadly, official data confirms this.
According to the official website of the European Commission, this year the total budget deficit of the 19 EU countries will increase almost tenfold year-on-year, reaching a record €976 billion or 8.9% of GDP. Such rapid growth in the budget deficit was caused largely by the consequences of lockdown introduced by the government to curb the spread of the virus. Therefore, the EU seems to be heading for a historic economic recession on the back of the coronavirus pandemic. "It is now quite clear that the EU has entered the deepest economic recession in its history," economic commissioner Paolo Gentiloni said. "Both the depth of the recession and the strength of recovery will be uneven, conditioned by the speed at which lockdowns can be lifted, the importance of services like tourism in each economy and by each country's financial resources," Gentiloni added.
Currently, financial authorities alongside the governments of EU countries are looking for a solution to this difficult situation. They are considering steps that should be taken to eliminate the negative consequences. "It is clear that both fiscal support and monetary policy support have to remain in place for as long as necessary and ‘cliff effects’ must be avoided," Christine Lagarde, president of the ECB, pointed out. Marco Valli, Head of Macro Research at UniCredit Bank, believes that the EU governments should maintain their stimulus programs to support the economy and ease the economic fallout in the long term.
