The budget deficit of 19 countries in the euro area due to the coronavirus pandemic will increase 10 times this year compared to the previous year and will reach 976 billion euros. This will be equal to 8.9 percent of GDP, which will be a record since 1995, writes the Financial Times.
The previous peak was in early 2010 when the deficit rose to 6.6 percent of GDP. Then it turned into a debt crisis and caused concern among investors. However, this year they have not received any alarm signals about a sharp increase in government spending on the fight against the pandemic. The cost of borrowing, even for countries such as Italy and Greece, fell to a record low in early October due to the large-scale program of the ECB to buy government bonds.
вЂњFirst you have to worry about winning a war, and then figure out how to pay for it,вЂќ said Carmen Reinhart, chief economist at the World Bank. After a short period of recovery, European countries may face a new recession, and an economic slowdown is possible in the fourth quarter, analysts say.
Earlier, the International Monetary Fund (IMF) predicted that the eurozone's national debt, which rose more than 15 percentage points from last year, will reach 100 percent of GDP this year and will remain at the same level next year. In the middle of summer, the leaders of the EU countries agreed on a plan to rescue the economy, which is designed for 750 billion euros.