Eurozone lockdowns will hammer bloc’s recovery
THE eurozone risks plunging into its third Covid slump this winter after Germany and Austria’s move to stamp out soaring cases raised fears of widespread lockdowns.
Forecasters warned renewed restrictions will slow the recovery and could even trigger another contraction in the fourth quarter as the euro and eurozone stock markets were sent sliding by rising lockdown fears.
Austria’s full national lockdown will knock 1.5pc off its fourth-quarter GDP if it lasts three weeks, with risk of contagion to other countries such as Germany, economists at Capital Economics predicted.
The eurozone was on the road to recovery after suffering a double-dip recession during the Covid crisis. However, the move to strict restrictions in Austria and the Netherlands raised fears that others will soon follow as Covid cases in Germany take off.
Angela Merkel, the chancellor, has already announced restrictions on the unvaccinated, describing the current wave gripping Germany as dramatic.
The escalating situation in Germany raised fears it could need even tougher measures after daily cases doubled in a matter of weeks.
Jessica Hinds, at Capital Economics, warned that “stagnation, or even contraction, are plausible” for the eurozone economy in the fourth quarter, with risks biggest in Germany.
She said a lockdown in Europe’s largest economy “would inevitably have a much greater impact on the eurozone”.
Nicola Nobile, at Oxford Economics, warned: “With industry far from buoyant, it means that in some countries there could barely be any growth in the fourth quarter.”
Lockdown fears ensured markets in Europe finished the week on the back foot. The euro hit a 16-month low against the dollar, while the Euro Stoxx 50 – an index tracking the eurozone’s blue-chip stocks – slipped 0.5pc yesterday, falling away from the 14-year high hit earlier this week.
It came as Christine Lagarde, the European Central Bank president, called for a “patient” response to eurozone inflation hitting its highest level in 13 years.