The Governing Council of the European Central Bank (ECB) already ruled out a rapid recovery of the European economy at the end of April, according to meeting minutes published on Thursday.
A so-called "V-shaped" rebound, which would quickly follow the downturn caused by the new coronavirus (Covid-19) pandemic, "can certainly already be ruled out," the minutes say. Such a rebound would mean there was limited economic damage.
"If consumers do not regain confidence soon after the end of containment, there is a risk that demand will remain subdued," the central bankers noted.
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The crisis’ effects on employment will depress demand, with the risk of a prolonged recession. The ECB has said it is ready to further strengthen its tools for fighting the crisis.
The institution was expecting the euro area's gross domestic product to fall by "5 to 12%" this year, ECB president Christine Lagarde explained. That margin reflects the "great uncertainty" surrounding the economic damage caused by the pandemic.
“Of the three scenarios presented, the low impact scenario was probably already too optimistic," according to the minutes.
The macroeconomic projections (related to large-scale aspects of the economy) presented at the 4 June meeting "will be significantly lower than those presented in March," the central bankers also said.
Rather than a "V" shape, a growing number of economists are now predicting a "U" shaped recovery, with a growth trough for a few months and a recovery that would take time to take shape, penalised by sectors that have been affected for a long time, such as tourism or trade.
The Brussels Times