The eurozone was already in a weak state before the impact of coronavirus. Eurozone real GDP increased just 0.1 percent quarter on quarter and one percent year on year in the fourth quarter of 2019, resulting in its weakest performance in six years. Germany’s output was flat, while Italy and France suffered contractions.
Outside the eurozone, the UK economy also stalled in the fourth quarter.
IHS Markit expects the spreading virus to do serious damage to trade, travel and tourism and financial markets.
Italy is especially vulnerable, given its fragile economy, the high incidence of COVID-19, and resulting restrictions on activity.
As many economists wonder whether the coronavirus pandemic will be a rerun for Europe of the 2008 financial crash, leading economist and former Greek Financial Minister Yanis Varoufakis argued it would be a mistake to see the economic response to coronavirus in isolation, as the outbreak has merely deepened and accelerated a crisis that has never ended.
In a video posted on his YouTube channel DiEM25 last week, he said: “Don’t let anyone tell you that the 2008 crisis ended and that now you have a new one.
“That crisis never ended. It just moved in different forms, travelled from one continent to another.
“But nevertheless it has always been with us.
“The world never went back to some kind of equilibrium after 2008.
“What coronavirus has done, it has deepened and accelerated this never-ending non-stop crisis that began in 2008.”
Mr Varoufakis explained that the only reason why there has been a resemblance of recovery after 2011 is because central banks and governments took it upon themselves to reflect the financial markets.
He added: “They printed trillions and trillions of money and threw them at the 0.1 percent at corporations that were already full of money. For example, Apple, Google and so on.
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“They boosted inequality massively and stabilised financial markets. But at the same time, they depleted all serious investments in good quality jobs in labour. health, education.”
The expert noted: “This is why there has been so much discontent even before COVID-19 arrived on the scene.
“When coronavirus arrived on the scene it found a global capitalism that was sitting on a gigantic bubble of private debt that had been minted by central banks on behalf of financial capital.
“COVID-19 has pricked the bubble on which financial capitalism was sitting up until now.
“So even if the financial markets are eroded once more, the level of investment is going to be even lower than it was.”
Referring to the proposals of his political movement DIEM25 or Democracy in Europe Movement 2025, the former Finance Minister argued they have never been more pertinent and urgent than now.
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He said: “We need a common investment policy based on an alliance between the European investment bank and the European Central Bank.
“We need a universal basic dividend.
“We need a carbon tax and a social equity fund, the purpose of which will be to energise both private capital and public finance.
“We need public financial instruments in order to take the liquidity that exist in our financial circuits and put it into good use.
“Press them into public service in terms of public health, in terms of creating good quality jobs.
“The agenda of DIEM25 has never been more pertinent and has never been more urgent than today.”
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