The eurozone’s economy has plunged back into recession as the impact of the pandemic continues to hit activity.
Europe’s economies have been set back by a renewed increase in infections this year and Covid-related restrictions.
The eurozone reduced by 0.6% in the January-to-March period – the second consecutive contraction, which is a widely-used definition of a recession.
It is the second such episode, a so-called double-dip recession, since the outbreak of the pandemic.
But, among the national economies that have reported data so far, that pattern was repeated only by Italy.
Other countries recorded some growth in one or other of the last two quarters.
The French economy did expand in the first three months of this year, by 0.4%, following a decline at the end of 2020, although the rebound was described by the national statistical agency as “limited”.
In Germany it was the other way around, with some expansion in the fourth quarter of last year and a sharp decline – of 1.7% – revealed by the latest figures.
There were some specific factors that may have affected Germany.
Claus Vistesen of Pantheon Macroeconomics says the economy was hit hard by a value added tax (VAT) hike which led to a fall in spending and construction.
A temporary VAT cut in Germany – intended to support the economy during the pandemic – expires at end at the turn of the year.
Andrew Kenningham of Capital Economics also pointed out that supply disruptions hitting Germany’s large manufacturing sector, especially the motor industry.
The bigger picture is a region where economic activity has been set back once again by the surge in virus and due to restrictions imposed to curb it.
The figures are particularly alarming in the case of Italy, where the economy is still 6.6% smaller than at the end of 2019, before the pandemic.
