The coronavirus (COVID-19) struck Europe with stunning ferocity, Poul M. Thomsen, Director of the European Department at the International Monetary Fund (IMF) said on Monday.
Thomsen added that in Europe’s major economies, nonessential services closed by government decree account for about one-third of output.
Each month these sectors remain closed translates into a 3% drop in annual GDP, and that is before other disruptions and spillovers to the rest of the economy are taken into account, Thomsen said.
Thomsen anticipates that a deep European recession this year is a foregone conclusion. He noted that Europe’s generally strong welfare systems and social market model will facilitate the delivery of targeted assistance to firms and households. He added, however, that there should be no doubt about the complexity of this task.
All countries in Europe will need to respond aggressively to the crisis, in a manner that is both bold and commensurate to its scale, he said.
Thomsen added that policymakers in the advanced economies have made good use of their policy space and institutions, putting in place large monetary and fiscal expansions to blunt the impact of the crisis.
The IMF is moving quickly to support its members during this time of extraordinary systemic challenges, he mentioned. Thomsen also said, “We are dramatically streamlining our internal rules and procedures so as to be able to respond with the speed, agility, and scale called for by this unprecedented peacetime challenge. “