The collective economies of most of the European Union saw a record decline during the second quarter of 2020, data showed Friday. European Union leaders have agreed on a 750 billion-euro recovery fund backed by common borrowing to support the recovery from 2021.
National governments have stepped in with loans to keep businesses afloat and wage support programmes that pay workers salaries while they are furloughed.
Federal Reserve Chairman Jerome Powell on Wednesday acknowledged the slowdown in economic activity and announced that the US central bank is keeping interest rates near zero and will continue pumping money into the struggling economy.
However, the jobless rate for July held steady at 6.4%, unchanged from June in a sign that the initial effects of the pandemic were easing.
Locked-down families, many surviving on government handouts and job-preservation schemes, tightened their purse strings amid fears for jobs but also because shops were closed. Germany's drop was also the biggest since quarterly growth figures began being compiled in 1970, the official statistics agency said. Company forecasts for the rest of the year assumed that there is not a renewed outbreak of COVID-19, the illness caused by the coronavirus.
Rosie Colthorpe, European economist at Oxford Economics, said the current third quarter was likely to see high growth rates, "but not almost large enough to make up for the damage".
It said the drop was "part of an worldwide context in which the main economies are recording reductions of a similar magnitude due to the spread of the pandemic".
The plunge in quarter-on-quarter gross domestic product (GDP) took Italy - the eurozone's third-largest economy - into recession as it had shrunk by 5.4 per cent in the first quarter. The pain has been so damaging to jobs and industries that the government is talking down the possibility of another nationwide lockdown as infections tick upwards again.
Finance Minister Bruno Le Maire pounced on the data to encourage consumers to spend money saved during the lockdown to pull the country out of the deepest recession since World War Two.