Europe Slowly Picks Up Pieces After Virus Shattered Economy

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Europe Slowly Picks Up Pieces After Virus Shattered Economy
Credit: © Reuters.

(Bloomberg) --

Economic confidence is slowly returning to the euro area where companies from manufacturers to retailers are picking up the pieces after devastating coronavirus lockdowns.

Sentiment in a European Commission survey rose in June, though less than economists had forecasts, and it remains well below the levels seen at the start of the year. The report -- like similar ones published recently -- indicates that full recovery is still a long way off.

The 19-nation euro region is set to shrink more than 8% this year, and European Central Bank President Christine Lagarde has warned that the pandemic will change parts of the economy permanently.

So far, confidence has clawed back about 30% of the combined losses of March and April, when far-reaching restrictions brought public life to a near standstill. While those limitations are now gradually being lifted, the continued spread of the disease in parts of Europe, as well as in the Americas, serves as a cautious reminder how quickly the situation can deteriorate again.

Hundreds of thousands of workers are already facing unemployment, with companies from Deutsche Lufthansa (DE: LHAG ) AG (OTC: DLAKY ) -- Germany’s severely battered airline that just secured a government bailout -- to plane maker Airbus SE (OTC: EADSY ) preparing to cut jobs.

The commission report showed that employment expectations in the euro area have improved from their lows, but for some sectors they remain as much as 60% below pre-virus level.

Still, consumer confidence rose in June as households expect the general economic situation to improve. Sentiment measures increased across all industries and major euro-area economies.

The improvements come on the back of massive stimulus campaigns. The ECB is buying 1.35 trillion euros ($1.5 trillion) worth of debt, and governments have pledged hundreds of billions of euros in support. German Chancellor Angela Merkel’s coalition agreed this month on a sweeping 130 billion-euro plan, and Economy Minister Peter Altmaier has flagged a package of measures aimed at exporters for the coming week.

What Bloomberg’s Economists Say...

“If any European country is likely to see a V-shaped recovery, it’s Germany. Getting the virus under control caused less disruption than elsewhere, fiscal support is substantial and activity is picking up again.”

-- Jamie Rush, chief European economist. Read the GERMANY INSIGHT

The European Union’s leaders held their first debate on a proposed 750 billion-euro plan to help their economies heal from the pandemic, and agreed to meet in person next month with the aim of reaching an agreement.

©2020 Bloomberg L.P.

© Bloomberg. Tourists and Venetians sit at terraced tables of bars in Cannaregio district of Venice, Italy, on Friday, June 12, 2020. The shuttering of businesses led to a 5.3% decline in gross domestic product in the first quarter, and a far deeper slump is anticipated this quarter.

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