Across Europe the containment measures adopted to slow the spread of coronavirus will lead all economies to contract in 2020 We believe that Italy which currently reports the highest number of deaths worldwide saw its output drop by 5 quarter on quarter i

Across Europe, the containment measures adopted to slow the spread of coronavirus will lead all economies to contract in 2020. We believe that Italy, which currently reports the highest number of deaths worldwide, saw its output drop by 5% quarter on quarter in the first quarter of this year as lockdown measures severely disrupted economic activity. The picture looks even worse across the entire euro zone for the second quarter, with all countries expected to post a contraction of their output on a quarterly basis. The situation appears especially grim in Germany. The country ’s huge manufacturing sector (which represents a fifth of the economy) is highly export oriented, which means that the country is particularly exposed to both supply chain disruption and sinking global demand. We expect that Germany ’s output will contract by 10% in the second quarter on a quarterly basis, and by 6% overall this year. The country ’s recovery will be slower than that of other euro zone countries, such as France, where typically more resilient domestic consumption represents a larger driver of growth.