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Europe curbs snuffing out growth

  • Source: China Daily
  • Nov.05,2020

A flurry of new lockdowns in Europe amid fast-rising rates of coronavirus infections will exact a heavy toll on the continent's economies, experts have warned.

The United Kingdom is set to go back into a lockdown on Thursday. Belgium, France, Germany, and Greece have all recently taken similar steps. Spain and Italy, while not yet fully locked down, have also greatly restricted enterprise and social interaction.

The moves, while welcomed by medical professionals, are not as popular among financial analysts. Some told the Financial Times the eurozone economy is likely to shrink by 2.3 percent in the fourth quarter as a result.

The paper said a survey of 18 economists suggests Europe is in line for a worse performance than they were expecting.

Christian Keller, chief economist at Barclays, said: "Although the outlook for manufacturing has held up relatively well … the downturn in the much larger service part of the economy directly affected by the new restrictions is likely to pull the euro area economy into negative growth again."

The eurozone had partially recovered from a recession caused by lockdowns earlier this year and, in the three months to September, posted record quarterly GDP growth of 12.7 percent, despite output being well below pre-pandemic levels.

The Financial Times said economists at leading banks and institutions were almost unanimous in saying the eurozone economy will now shrink again.

But they said the economic decline should be less severe than during the first lockdown, when economic output fell by 15 percent, because the latest restrictions are less prohibitive.

Eurozone finance ministers were expected on Tuesday to discuss how to respond to the darkening economic outlook.

Katharina Utermohl, an economist at Allianz, told the UK newspaper that businesses "have gained experience in navigating tough lockdown restrictions".

German Foreign Minister Heiko Maas told the Tagesspiegel newspaper that Berlin expects to keep its borders open this time.

The virus has infected over 46.9 million people worldwide, with more than 1.2 million deaths, Johns Hopkins University data shows.

The Guardian newspaper added that Bank of England policymakers will likely agree to inject up to 100 billion pounds ($129 billion) into the British economy this week.

Gerard Lyons, an economic adviser to Boris Johnson when the UK prime minister was London's mayor, told The Guardian: "The economy will contract and while not by as much as it did in the initial lockdown, it will still be significant, possibly as much as 7.5 to 10 percent."

'Look like March'

The New York Times said the idea that the European economy was "snapping back smartly from the pandemic" must now be replaced with the fact that "it's starting to look like March again on city streets".

Johnson on Monday defended his decision to impose the new lockdown on England, following similar measures taken in the other constituent nations of the UK. He said Britain could face a "medical and moral disaster" if nothing changes.

In Italy, Prime Minister Giuseppe Conte on Monday said that under the new curbs, high school and university students will have to go back to online learning, and passenger numbers on public transportation will be reduced to 50 percent of capacity.

Austria and Greece on Tuesday became the latest European nations to impose spirit-crushing curbs to combat the coronavirus surge, with a deadly terrorist attack in Vienna ahead of a partial lockdown compounding the misery.

Much of Portugal also faces a lockdown, from Wednesday, and France, having imposed its second shutdown last week, is also preparing to further tighten restrictions.

The fresh lockdowns follow warnings from the European Centre for Disease Prevention and Control that virus infection rates are climbing.

In Belgium, Europe's most severely affected nation, more than 1,700 people in every 100,000 are infected with the virus. The Czech Republic, Slovenia and Luxembourg all have infection rates of more than 1,000 for every 100,000 people.

Georgian Prime Minister Giorgi Gakharia has tested positive for the virus, his office said.