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The rapid spread of the Delta coronavirus variant has economists feared that improving Europe’s economic outlook is jeopardized by rising infection levels and the reintroduction of travel and social restrictions.
The lifting of most lockdowns in the region in recent months has led to an increase in business activity, retail spending and household confidence, prompting many economists to revise their forecasts upward. of European growth.
However, these assumptions are being questioned now that the highly infectious Delta variant already accounts for the majority of new cases in many European countries and is pushing infection rates to their highest level in months.
“I’m a little more worried that it could be derailed by Delta,” said Erik Nielsen, chief economist at UniCredit, who raised his eurozone growth forecast for this year from 4% to 4.5%. “It has to go pretty badly before we get another lockdown, but Google mobility data shows that it’s not so much locks that determine behavior, but voluntary restraint.”
Germany and France on Friday warned their citizens against traveling to Spain, where the coronavirus infection rate has overtaken Portugal to become the highest in continental Europe, dealing a heavy blow to its sector of tourism at the start of the crucial summer season.
Pablo Hernández de Cos, governor of the Bank of Spain, said his strong growth forecast was “based on the assumption that the health crisis would be over after the summer” and that Spain’s tourism sector would reach half of. its pre-pandemic income this summer, up from a fifth last year. He warned that there was still “uncertainty surrounding the emergence of new variants of Covid-19 and the containment measures these may require”.
The Netherlands announced on Friday it would reintroduce restrictions on restaurants, bars, cafes, nightclubs and live events – just two weeks after lifting them – due to a more than ten-fold increase in the The country’s daily infection rate to nearly 7,000 during this period.
Cyprus also reintroduced rules on the number of people allowed in hospitality and entertainment venues last week after its daily rate of coronavirus infection peaked for the year. Meanwhile, Portugal has said holidaymakers need to be vaccinated, test negative or recover from the virus to stay in its hotels or eat at restaurants in many areas.
The European Center for Disease Prevention and Control said on Friday that the weekly Covid-19 infection rate for the EU and the European Economic Area had risen to 51.6 per 100,000 people, from 38.6 for the week before, while hospitalization and death rates were stable. He predicted that the infection rate would exceed 90 per 100,000 people in four weeks.
“There are reasons to be concerned, because the risks are there and there seems to be a negative dynamic,” said Carsten Brzeski, head of macro research at ING.
Last week, the European Commission raised its forecast for EU growth in 2021 to 4.8%, after a record 6.2% contraction last year. His prediction would be the fastest expansion since 1976 and would mean the EU economy has returned to its pre-pandemic level of production by the end of this year.
Paolo Gentiloni, the European commissioner for the economy, said that the EU’s forecast did not take into account the prospect of a new wave triggered by the Delta variant, but that it was a “risk on the decline “. He downplayed the likelihood of further lockdowns, saying, “We don’t see a trend towards further restrictions. . . we are seeing a trend towards easing restrictions in the major countries. “
Some economists are reassured that most Delta infections involve younger people who are less likely to become seriously ill. Hospitalizations and deaths from the virus remain very low, while more than 44% of adults in the EU are fully vaccinated.
“Thanks to rapid advances in immunization, we still consider it unlikely that countries will again have to impose serious restrictions on economic activity to contain medical risks,” said Kallum Pickering, economist at Berenberg.
Spanish government argues hospitalization rates remain low – with just 2.6% of beds occupied by Covid patients compared to 2% a week ago – and the infection rate is less than the growing share of fully vaccinated people.
Additional reporting by Daniel Dombey in Madrid and Sam Fleming in Brussels
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