The economy of the Eurozone has received a crushing blow from the coronavirus pandemic. It is mostly reliant on its services sector, which has so far received the most substantial hit in the wake of the anti-spread measures that are currently being implemented by national governments.
Germany has decided to partially close its borders with neighbouring countries, similar to what other governments in the Schengen free-travel zone are already doing in a bid to thwart the spread of the coronavirus.
Last week, French President Emmanuel Macron said that the virus “holds no passport”, which underscores the threat from the pathogen’s rapid spread. Meanwhile, Europe has surpassed China as the epicentre of the COVID-19 outbreak.
The increasingly draconian measures that are being implemented by European governments are having a markedly negative impact on the Eurozone’s services industry.
Some grim estimates project that most airlines could go bankrupt in a month due to the restrictions on air travel and the shattered tourism industry, as quarantines are imposed all across Europe.
These could have rippling effects over the rest of the services industry, which is almost certainly going to tank following last month’s marginal improvement.
EU Services PMI. Image source: TradingEconomics.com
Europe’s dependency on services can be observed on its tumbling stock market. The EU Stocks 50 has underperformed compared to other affected economies, chiefly the Japanese and American ones.
Even ECB’s promise to boost the money supply in the Eurozone is proving insufficient to offset the tumble.
EU Stocks 50 vs Other Indices. Image source: Trendsharks ©, created with TradingView.com
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