Coronavirus crisis: Deadly virus could plunge eurozone into recession – EU warning

The European Commission’s “Winter 2020 Economic Forecast” warns of “considerable uncertainty over the future partnership with the UK” and the viral outbreaks impact on global trade. “The outbreak of the ‘2019-nCoV’ coronavirus, with its implications for public health, economic activity and trade, especially in China, is a new downside risk,” it reads. “The baseline assumption is that the outbreak peaks in the first quarter, with relatively limited global spillovers.

“The longer it lasts, however, the higher the likelihood of knock-on effects on economic sentiment and global financing conditions.”

Brussels’ gloomy forecast has spelt out dire warnings for the bloc’s biggest economies – Germany, France and Italy.

Paolo Gentiloni, the European commissioner for the economy, warned: “We still face significant policy uncertainty, which casts a shadow over manufacturing.

“As for the coronavirus, it is too soon to evaluate the extent of its negative economic impact.”

Germany and France’s economies are predicted to grow just 1.1 percent of GDP, whereas Italy will likely grow by just 0.3 percent.

Analysts have predicted Berlin’s prized motor vehicle industry could see its profits slump as a result of factory shutdowns in China.

Authorities have tried to curb the outbreak of the virus, which has killed more than 1,000 people.

France and Germany’s weaknesses have been exposed with signs of huge declines in industrial production in both countries.

The euro has slumped to the lowest rate against the dollar since 2017 and German 10-year bond yields remain below zero.

The risk remains of recession in Germany, which is Europe’s biggest economy, with the figures to be announced on Friday amid fears they could show a contraction in the fourth quarter.

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Tuoumas Malinen, professor of economics at the University of Helsinki, has warned that recession fears in both China and the eurozone could have huge implications for both economies.

Writing on Twitter, he said: “The eurozone has been flirting with recession since November. December industrial figures were just horrible.

“A massive fall in Chinese demand in January, February and, likely, March will push the eurozone into a recession.”

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He added: “Alas, the true risk of the coronavirus outbreak for the global economy is not China, it’s the eurozone.

“Why? Because we hold the largest concentration of global systemically important banks.”

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