The forecast made clear that the pandemic has obliterated Europe’s slow recovery from that crisis. After a partial bounceback next year, the bloc’s economy will still be 3 percent below the previously forecast level by the end of 2021.
“It is now quite clear that the E.U. has entered the deepest economic recession in its history,” said Paolo Gentiloni, the top E.U. economic official, outlining a grim picture of rising unemployment and dashed opportunities.
Despite the expectation that the economy will grow by 6.1 percent next year, the forecast said that if infections rise again, another three percentage points could be shaved off the economy this year, worsening the crisis even more. If E.U. countries fail to coordinate their economic response, Gentiloni said, the crisis could also intensify.
Deep divides have emerged among E.U. members about how to fight the crisis. Southern European countries that have been hit hardest by the virus have pushed for transfers of money from the stronger nations in the bloc and for a collective effort to fend off the recession. Northern countries including the Netherlands and Germany are more skeptical.
The projections also made clear that the economic consequences of the pandemic will be unequally spread across Europe. Spain, Greece and Italy will be walloped by the crisis, with their tourism-dependent economies shrinking by more than 9 percent this year and recovering more slowly, since elements of the tourism sector may take a permanent hit. France would also take a blow, with a decline of 8.2 percent, while Germany would be relatively better off, shrinking 6.5 percent. Poland would be the least-affected country in Europe, with a drop of 4.3 percent.
The unequal blow may make a coordinated response more difficult among E.U. nations, with some countries feeling the crisis more keenly than others. The bloc was also somewhat hamstrung in 2008 and especially during the euro crisis that started two years later, when Greece needed multiple bailouts to keep afloat amid dissension about how generous other countries should be.
Unlike the United States, which can print and borrow an almost unlimited amount of money to finance its goals, countries that use the euro are more limited in their responses because they share control over the European Central Bank instead of directing monetary policy on a national level.
The E.U. figures included a projection for the U.S. economy that forecasts a 6.5 percent contraction this year, suggesting that Europe’s downturn could be worse. But even though economic growth is expected to take a harder hit in the E.U. than in the United States, Europe is projected to do better in preserving jobs, Gentiloni said.
E.U. unemployment is expected to rise from 6.7 percent in 2019 to 9 percent this year. Although that is a major blow, the United States faces an even heavier one. Analysts estimate that the U.S. unemployment rate has already more than doubled, topping 10 percent.
The difference in Europe is that most governments have chosen to subsidize private salaries to avoid layoffs. Those decisions, although costly, could help hold the economy in place if the crisis eases relatively quickly.
Quentin Ariès contributed to this report.