The Eurozone economy has probably bottomed out in its downturn due to the Great Seclusion caused by the Covid-19 pandemic and it is foreseeable that in the coming months begin to recover, with a rebound in the third and fourth quarter of the year, although it will take up to two years to recover pre-crisis levels, according to the vice president of the European Central Bank (ECB), Luis de Guindos, during a telematic session organized by Esade Alumni.
Guindos has confirmed that “at the moment there is a level of brutal uncertainty.” For the former Minister of Economy and Competitiveness “the only sure thing” is that the Eurozone GDP fell almost 4% in the first quarter and that the fall in the second quarter may be “double or triple”Since the European economy was not prepared for a confinement of the intensity and characteristics of what has occurred.
In this sense, Guindos has stressed that the recovery vto to depend on the evolution of the pandemic itself, that there is no second wave of infections, and after how the de-escalation of the measures applied is carried out, pointing out that the ECB is confident that there will be a rebound in activity in the third and fourth quarters.
“The profile will be a brutal fall in the first half and a significant recovery, but not complete, in the second,” Guindos said, with the prospect that in 2021 the GDP of the euro area will grow “around 6%”. “In total it would take a year and a half or two years to recover the position that existed before the crisis,” he warned.
Thus, on the central stage of the institution, with a Eurozone GDP drop of around 8% in 2020 and a recovery of 6% in 2021, the banker has warned that there will be a very strong increase in the deficit in 2020 and a reduction in it in 2021, which should continue in 2022, for, thereafter, go back to normal using automatic stabilizers and because the extraordinary measures adopted will no longer be necessary.
“We would have approximately two exercises with a much higher deficit, although the legacy that will remain will be a higher public debt ratio due to the need to finance the largest deficit, “he acknowledged.
The ECB will do “everything necessary”
On the other hand, the vice president of the ECB has ensured that the entity will continue to do “whatever it takes” to fulfill its mandate and ensure that its monetary policy is transmitted to all parts of the eurozone, despite the recent opinion of the German Constitutional Court.
“We are subject to jurisdiction of the EU Court of Justice And from a political point of view we are continually calling the European Parliament to account. That is our obligation, “said Guindos, to immediately reiterate the ECB’s commitment to” do everything necessary to ensure that monetary policy is correctly transmitted to all countries and price stability is guaranteed. “
Likewise, the Vice President of the ECB has rejected any possibility of rupture of the euro zone, highlighting the high support of the single currency among citizens, as well as the degree of European solidarity.
“It will not happen, the integrity of the euro is fundamental, it is a basic principle,” he said. “Now we have a ‘first division’ currency and we have an institutional framework that allows us to avoid errors as in the past», He added in reference to the policy of devaluations in Spain with the peseta.
Guindos has underlined the importance of european solidarity, with the ECB acquiring a high percentage of the financing needs of the Spanish Public Treasury, which is a clear sign that the European institutional system is helping the euro to survive at this time of great complexity and that this crisis is not much More serious.