Business News: European economic downturn in first quarter.
The European economy contracted by 0.6% in the first three months of the year as the slow launch of vaccines and prolonged blockades delayed the hoped-for recovery and underlined how the region lags behind the other major economies in rebound from the coronavirus pandemic.
The decline in output for the 19 countries using the euro was less than the 1% contraction expected by economists but still far below the rebound in the United States and China, two other pillars of the global economy.
Export-dependent Germany, which was already heading into recession before the pandemic with declining production, saw its economy shrink by 1.7%, the highest in Europe. The economies of Spain, Italy and Portugal also contracted.
Slow with the initial launch of the vaccine, much of Europe is battling a third wave of coronavirus infections. Germany has a night curfew in 15 of its 16 states, and shopping requires appointment bookings and a negative test.
France showed unexpected growth of 0.4% compared to the previous quarter, while the main negative surprise came in Germany, the largest economy on the continent. Business fell 1.7% more than expected as the manufacturing sector was hit by the disruption of component supplies in addition to the hit to services and travel from activity restrictions linked to the pandemic.
French authorities expect the outlook for COVID-19 in the country to improve next month, when a larger percentage of the population is vaccinated. The government is slowly starting to lift the partial blockades, despite the still high number of coronavirus cases and hospitalized COVID-19 patients.
President Emmanuel Macron said Thursday that the outdoor terraces of French cafes and restaurants will be able to reopen on May 19 along with museums, cinemas, theaters and concert halls under certain conditions.
Concern about a potential second season of missed holidays has clouded the prospects for the Mediterranean countries Italy, Spain and Greece, which are heavily dependent on tourism. Greece lifted quarantine restrictions for visitors from EU countries and will allow the reopening of restaurants and cafes for outdoor service from May 3. Travel revenue dropped 75% last year.
While the prospects look better for European countries, some in the suburbs may have more trouble returning. Tourism-dependent countries such as Greece, Italy and Spain could suffer more lasting pain from blocks, according to a recent analysis from ING Bank.
The European Union is in the process of finalizing a plan for a so-called “vaccine passport” system to allow tourism to return this summer. But normality still seems far away.