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The fear of a second recession gains weight in Europe with Spain at a disadvantage

Europe fears a new recession and has very few tools to own its destiny in the short term. The president of the European Central Bank said it a few days ago, Christine Lagarde, the economists warn and begin to suggest (although not yet confirm) the data. The fourth quarter of 2020 was bad, but not as bad as feared. It closed negatively in the EU, according to preliminary figures, but the worst-case scenario was avoided. The key, however, is not in a decimal the of right now, but what is going to happen from spring onwards, what is going to happen to vaccines and whether science will be able to allow the economy to reactivate or we are headed for another lost year.

Between September and December, the community economy contracted by 0.5% and the Eurozone by 0.7%, according to provisional and incomplete data made public yesterday
by Eurostat. Not all the countries are there, but the largest ones are. The fall comes after the powerful rebound in the third quarter (12.4% in the euro zone and 11.5% in the whole of the EU), but above all after the deepest drop since the homologous records began in 1995, with an ax hit higher than 11%. According to a first estimate for 2020, with adjusted data, the fall for the course would have been around 6.8% for the Eurozone.

“The outlook for the first quarter remains negative and the Eurozone will probably suffer a second recession. But the key remains the expected rebound in the following quarters if the vaccination process accelerates in line with expectations,” he says Ãngel Talavera, Head of Europe at Oxford Economics in London. The ECB’s measures may have been enough to contain the decline, but they are not enough to push the comeback. Citizens save and do not invest or consume, as if the conditions of a Japanese deflation were paraphrased. Governments spend like never before, but still in a contained way, fearing that at the end of this year the fiscal exception authorized by Brussels will end. And all hopes are pinned on vaccines. That is why terrible weeks like the last one, like one bad news after another and the forecasts of organizations such as the IMF, only worsen the forecasts and generate doubts.

GDP fourth quarter January 2021

In the last quarter, Germany grew 0.1% quarter-on-quarter and Spain 0.4%. But Italy (-2%) and France (-1.3) suffered contraction. “The data for the quarter, better than expected, may more or less offset the expected reduction for the first of 2021”, explains Talavera. Analysts believe the recession, two quarters in a row in the red, will not be avoided. “In the first quarter of 2021 the fall is likely to be somewhat more pronounced,” they point out at Comerzbank. But the blow will not be like those already experienced and the rebound in spring should be strong again.

That with a scenario of massive vaccination, gradual relaxation of confinements, reopening of the hotel and an active summer season, at least in large part. Everyone asks for caution, but without this ‘normality’ there is no way to save the course, especially in the Mediterranean countries, those that paint the worst.

In the political world of economics, when things go well nothing wants to be the ominous who turns off the music and when things go bad few (without public charge) manage to see green shoots. Macroeconomics is data, but microeconomics, the ugly duckling of ‘grim science’, responds to primal feelings, from euphoria to irrational fear. And in times like the present, such as epidemics, lockdowns, delays in investment decisions, unemployment and sheer uncertainty, anything but optimism prevails.

Spain is doing well in relative terms in the fourth quarter, but not in the total for the course and comparing it with the previous year. The interannual rate between September and December was 9.1%, by far the steepest in the Union. More than twice that of German, almost twice that of French and almost 50% sharper than Italian.

The European Commission and the IMF foresee the strongest contractions in the entire continent for our country, but above all they revise their estimates for 2021 as the weeks go by, and always downward. From over 7% recently to around 5% now. Insufficient to compensate for what was lost and a chimera if the trips are not reactivated and the beaches are not filled.

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