The numbers show how bad the economy went in the period when we expected it to go badly. They offer some surprises about the countries that are most affected. They prove that some governments, such as Britain and Sweden, by limiting closures against the virus have killed more people without saving business. We remain hanging by a thread: we will know more about the coming months when the balance of summer infections will be clarified; in Italy we could have it later because, unlike in Northern Europe, our holidays are concentrated in August. If nothing else, common decisions by Europe continue to inspire confidence: although public debts have risen, interest rates have fallen considerably.
The European numbers
The second quarter of 2020 is confirmed for our continent as the worst in the last 75 years. The gross domestic product according to Eurostat fell by 11.7% in the entire EU and, within it, by 12.1% in the euro area. Italy, with -12.4%, is just below the average of the common disaster.
Spain (-18.5%), as you could imagine, but also Portugal (-13.9%) and France (-13.8%) are the most damaged than us. Spain and France are worse off than us even in comparison with the second quarter of 2019. Outside the euro area, Hungary by severely limiting civil liberties under the pretext of lockdown has not avoided a very heavy -14.5%. But the continental record of economic damage is up to the United Kingdom, which closed late and badly: -20.4%. Sweden did not benefit from having limited anti-contagion precautions: -8.6% compared to -7.5% in Denmark which, in proportion to the inhabitants, had a number of victims 5 times lower.
Waiting for employment
Less significant are the data on employees, -2.8% in the euro area again in the second quarter. Here the blow will be delayed, because it is partly hidden by mechanisms similar to layoffs adopted more or less everywhere. For example, Italy has so far lost about half a million mostly precarious jobs; you may lose at least as many with staff reductions in the fall. Throughout Europe, the measures taken by governments have greatly mitigated the burden of the crisis on citizens. In the first quarter, the disposable income of Italian families had dropped by 1.6%, compared to a GDP reduced by 5.4%. Furthermore, the anti-crisis measures in our country at least on paper are more vigorous than those in Spain and France.
The burden of debt
This is why the public debt burden is growing strongly: 2,530.6 billion euros in June according to the data released yesterday by the Bank of Italy. Between postponements of tax deadlines and fewer payments, revenue in the first six months fell by 10.3%, almost twenty billion. If Italy had acted alone, the interest on the public debt would have shot up. Instead, the EU’s action with the Recovery Fund has led to a general drop in rates in countries deemed at risk. The other yesterday, the Treasury placed BTp at 7 years, paying a third compared to March. The 10-year spread with Germany dropped from over 300 points to 150. The climate, expectations and orders indices can reveal little about the future, in the face of a resurgence of the virus. Even in Germany one can only say, as does the local Confindustria, that it will take at least two years to return to pre-crisis levels.