ASSESSMENTS

What a Coronavirus Crisis Means for Europe

Feb 28, 2020 | 18:24 GMT

Two women wearing blue, protective respiratory masks take a tour outside the Colosseum in Rome, Italy, on Jan. 31, 2020, after two cases of the new coronavirus were confirmed in the city.

Tourists wear protective masks outside the Colosseum in Rome on Jan. 31, 2020, amid reports that the new coronavirus outbreak had spread to the Italian capital. As of Feb. 28, Italy had reported 400 cases of the virus and 12 deaths. 

(ALBERTO PIZZOLI/AFP via Getty Images)

Highlights

  • The unfolding coronavirus outbreak in Italy will bring it closer to a recession by disrupting economic activity, particularly in the country's industrial core in the north.
  • While the economic impact will probably be more modest elsewhere in Europe, the virus could still temporarily disrupt supply chains and travel flows, and create uncertainty in EU financial markets.
  • Opposition parties across the bloc will increase pressure on their national governments to introduce border controls within the passport-free Schengen area, which would slow down the movement of goods and people across borders.

Europe's stock markets have plunged in recent days, with its largest economies (Germany, France, the United Kingdom, Italy and Spain) now all reporting upticks in cases of COVID-19, the coronavirus that emerged from China in recent weeks. Stocks in European industries reliant on Chinese supplies, such as in the technology sector, have suffered some of the sharpest losses, along with airline and credit card companies, due to the expected reduction of economic activity in Europe. But with the size and scope of the contagion expected to grow for at least several more weeks, these stock market dips may just be the tip of the iceberg as disruptions to Europe's supply chains, domestic consumption and tourism sector -- and potentially even border crossings -- begin to more acutely affect the bloc's already slowing economy....

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