The sharp drop in euro area gross domestic product ((GDP)) in the first quarter and the likelihood of a much more dramatic plunge in the second quarter are consistent with our forecast that the euro area economy will contract by around 10% this year, with risks skewed towards a larger contraction. These risks stem in part from the potential second-round effects on the economy from high unemployment, corporate bankruptcies, damaged animal spirits, and behavioral changes.
Recent anecdotal evidence confirms that these risks are very much alive. One major airline announced that it may need to