French unemployment surges in March, Morgan Stanley sees 12% drop in euro area GDP

The proportion of people without work for an entire month surged by 7.1% in March or 246,100, roughly tripling the 77,300 jump of March 2009, at the peak of the last financial crisis.

Precisely due to the evidence of the greater-than-expected hit to the economy from the Covid-19 pandemic, on Monday, analysts at Morgan Stanley cut their forecast for euro area GDP growth in 2020, penciling in an 11.8% contraction.

That was more than twice their previous forecast for a 5% drop in GDP growth.

The worse-than-expected hit to growth, partly due to authorities' caution in lifting lockdown measures, such as on events drawing large crowds, together with caution on the part of companies and consumers were the underlying motives behind the revised projections, Morgan Stanley said.

The damage to euro area periphery countries' fiscal deficits and growth was such that relief measures would result in a 20 to 30 percentage point jump in debt-to-GDP ratios, the investment bank added.

Heightened debt issuance was also now expected to force the European Central Bank to boost its PEPP debt-buying programme by a further €1.0trn in two tranches of €500bn, in June 2020 and at year-end 2021.

"In particular, the lockdown has been longer and tougher in France, Italy and Spain than in Germany, and these are also economies

with a high share of tourism and therefore more exposed," Morgan Stanley said.

On a related note, the latest weekly poll by Harris Interactive for LCI television, published for 23 April, revealed a ten percentage point drop in the proportion of French who were confident that authorities would act efficiently to end the pandemic.

Nonetheless, the same day, citing the School of Advanced Studies in Public Health, Le Monde reported that thus far lockdown measures had avoided a further 60,000 Covid-19-related deaths in France.