The European Union has agreed to the first-ever common debt bailout. EU leaders were facing significant pressure to do something, with 2,725,152 reported cases of COVID-19 in Europe, Industrial Production posting the lowest 3/12 on record (-20%), and other global economies issuing stimulus packages.
This spending package has the potential to help offset the decline from some of the badly injured industries, such as tourism. Let’s take a moment and compare the EU's stimulus to the US' and discuss what it may mean for our forecast.
|Region||Plan Size||GDP||% of GDP|
|EU||€1.8 trillion||€13.9 trillion||12.9%|
|US||$3.3 trillion||$21.4 trillion||15.4%|
The US is spending more as a percentage of GDP and has already pushed some of this funding into the economy. The EU is planning on spending a significant amount of its collective GDP, but this amount has yet to be approved. Parliament member states will still need to approve the deal before the money can start flowing into the economy.
In short, the EU’s stimulus spending will undoubtedly lift segments of the economy, but until the recovery plan is approved by Parliament and implementation begins, we won’t be raising our forecast. We are going to continue to watch the situation closely and will adjust our forecasts as necessary. If you are unsure of what this means for your European operations or forecasts, please let us know so we can help you navigate these uncharted waters.
Director of Economics