The eurozone was already in a weak state before the impact of Coronavirus. Eurozone real GDP increased just 0.1 percent quarter on quarter and one percent year on year in the fourth quarter of 2019, resulting in its weakest performance in six years. Germany’s output was flat, while Italy and France suffered contractions.
The UK economy also stalled in the fourth quarter.
IHS Markit expects the spreading virus to do serious damage to trade, travel and tourism and financial markets.
Italy is especially vulnerable, given its fragile economy, the high incidence of COVID-19, and resulting restrictions on activity.
As many economists wonder whether the coronavirus pandemic will be a rerun for Europe of the 2008 financial crash, unearthed reports shed light on how the bloc dealt with the succeeding southern-European public debt crisis.
According to a 2012 report by The Daily Telegraph, Germany drafted plans for Greece to default, potentially leaving the euro, as the EU had started facing up to the fact that the Greek debt crisis was spiralling out of control – with or without a second bailout.
Eurozone finance ministers met in Brussels to approve the next tranche of loans from the EU and the International Monetary Fund, designed to stave off national bankruptcy while the new Greek government was putting the country’s finances in order.
However, the severe austerity measures being demanded caused such fury in Greece, that Wolfgang Schäuble, the former German Finance Minister, did not believe that any government would have been able to implement them.
According to the publication, his worries were brought into the open after a secret European Commission was published, in which Mr Schäuble claimed that even if Greece had made good on its promises, it would have not been enough to reach the target of bringing total debt to 120 per cent of GDP by 2020.
A eurozone official told the publication: “He just thinks the Greeks cannot do what needs to be done.
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“And even if by some miracle they did what has been promised, he – and a growing group – are convinced it will not pull Greece out the hole.
“The idea instead is that the Greek government should officially declare itself bankrupt and begin negotiating an even bigger cut with its creditors.
“For Schäuble, it is more a question of when, not if.”
Mr Schäuble’s pessimism was not welcomed in Athens.
The hugely influential German politician’s doubts had been growing for several weeks, and prompted angry exchanges when Greece accused Germany of trying to drive it out of the euro.
His scepticism was not yet fully shared by Angela Merkel, who is said still to be determined to prevent Greece’s financial collapse.
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Another official said: “She thinks Greece going bust could cause a shock wave that buries other countries – with Spain and Italy among them.
“It could break apart the entire monetary union.”
Greece did indeed come precariously close to toppling out of the eurozone in 2015 at the height of a debt crisis, which required lenders throwing the country a financial lifeline on three occasions.
Its fiscal progress is currently being monitored by the eurozone and the IMF, which together lent Athens more than €250 billion (£232 billion) during its decade-long debt crisis.
The Greek economy will grow only slightly this year due to the impact of the coronavirus, by little over 0 percent,, Staikouras told Greece’s ANT1 TV on Wednesday.
The country had previously estimated economic growth of 2.8 percent this year.
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