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Coronavirus Lockdowns Bring Recession Threat Back to Europe
Posted
October 30, 2020
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October 30, 2020
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1:34Now PlayingEurope’s economic recovery is being cut short as governments implement new restrictions to fight the coronavirus that risk driving the region toward another recession.
The euro area’s four biggest economies are going into various forms of lockdown, overshadowing data on Friday that showed a record surge in third-quarter output.
A new slump is on the cards, governments are pumping in additional aid, and the European Central Bank is promising more monetary stimulus amid the rapidly deteriorating situation. It’s vice president, Luis de Guindos, said that stagnation, or even contraction, can’t be ruled out this quarter.
“The economic picture has definitely gotten worse,” said Carsten Brzeski, chief economist at ING Germany. “It’s called a double dip.”
The euro area’s recovery from the first coronavirus lockdowns in the spring was already looking like a dead-cat bounce before this week’s developments. Measures of activity were dropping, and confidence among companies and consumers had started to wobble after the summer bounce.
European stocks have tumbled, with the Stoxx Europe 600 Index heading for a third straight weekly decline. The impact on sovereign borrowing costs has been muted by ECB bond-buying.
In France, bars and restaurants will shut until at least the start of December, public gatherings are banned and non-essential retailers will also close. Germany will shutter businesses in hospitality and put restrictions on gatherings, while Italy is limiting opening hours.
Bank of Italy Governor Ignazio Visco said Friday the fresh wave of the pandemic will set back the repair of economies. Progress so far has been helped by huge government spending and emergency ECB stimulus, both of which will need to be ramped up even further.
“The resurgence of the pandemic threatens the results achieved so far,” Visco said. “There is a risk that the increase of virus cases, even though contrasted with less drastic measures than in the spring, will have a negative impact on the confidence and spending of families and businesses.”
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