The EU is bracing for a 'recession of historic proportions' and predicts a 7.4% contraction in 2020

• Europe will fall into a "recession of historic proportions" this year, the European Commission said.
• The EU economy will shrink by 7.4% in 2020, despite unprecedented economic stimulus measures to stem the economic downturn caused by the pandemic, it said.
• Italy and Spain will be the worst-hit major economies, contracting 9.5%, forecasts said.
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The European Union projected on Wednesday a "recession of historic proportions" for the eurozone in 2020, even after extraordinary and unprecedent interventions from central banks and

The 27-member bloc is expected to contract by 7.4% this year, while the eurozone — made up of the 19 members that use the euro — will shrink by 7.7%, the European Commission said in its spring forecast.

"The EU economy will experience a recession of historic proportions this year," the European Commission said.

Given how interconnected the big economies in Europe are, the speed and structure of recovery in each member state is expected to be co-related and dependent on the trajectory of the pandemic in each country.

"The EU and member states have already agreed on extraordinary measures to mitigate the impact. Our collective recovery will depend on continued strong and coordinated responses at EU and national level. We are stronger together," Valdis Dombrovskis, executive vice president of economic affairs said in a statement.

More positively, the EU also estimated a growth of 6.1% for the EU and 6.3% for the eurozone in 2021, though European Commissioner Paolo Gentiloni believes this might not be enough to fully make up for the year's loss.

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Key projections included in the EU's 2020 spring forecast:

• Among the largest member states, Italy's economy is expected to contract by about 9.5%.
• Real gross domestic product in Spain is expected to contract by almost 9.5% this year, with a sharp plunge in investment.
• In France, the economy is expected to shrink by about 8% this year, before recovering gradually in the second half of 2020.
• Germany is set to experience its deepest recession since World War II, contracting by 6.5% in 2020 as disruptions in value chains hamper the country's exports.
• Government budget deficits are expected to rise from 0.6% of GDP in 2019 to around 8.5% of GDP in both the eurozone and the EU in 2020.

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Gentiloni highlighted six key messages from the European Commission's forecast:

1. The EU has entered its deepest economic recession in history, significantly higher than in 2009 when the contraction was recorded at around 4.5%.
2. Both the recession and recovery are expected to be uneven. The figures could display "considerable differences" between the European economies.
3. Inflation is set to be significantly weaker as consumer prices fall, along with steep declines in oil prices and weakening demand for goods.
4. Unemployment is set to rise, although government policy measures should limit the extent. A decade-long period of improvement will end as the pandemic impacts the labour market. Number of hours worked is set to fall sharply.
5. Bold policies will result in public debt to rise in 2020 and economic stimulus packages will lead to a "marked deterioration" of public finances in all member states.
6. Risks surrounding the spring forecast are "exceptionally large" and tilted to the downside as they are based on a set of assumptions about the evolution of the pandemic. Covid-19 significantly changed the commission's outlook as economic activity in the EU dropped by one-third overnight.