Resurging coronavirus biggest threat to euro zone economy

Resurging coronavirus biggest threat to euro zone economy

The resurgence in coronavirus cases is the biggest threat to the recovering euro zone economy, according to a Reuters poll of economists, who say growth and inflation are more likely to create negative surprises over the coming year than positive ones.

Around 30 million people have been infected by the virus globally, and more than 900,000 have died, triggering some of the deepest recessions on record and breaking up supply chains around the world. COVID-19 global tracker here

While a strong euro zone rebound is underway as lockdown restrictions have been eased and businesses reopened, France and Spain among others in the 19-member bloc are grappling with a virus resurgence.

That is raising the possibility of renewed restrictions and lockdowns.

“A flaring in the number of COVID-19 infections over the summer months has made it very clear that if there is no effective vaccine, growth will be handicapped,” said Peter Vanden Houte, chief economist at ING.

“There is also the fear of negative second-round effects once the current recession starts to be reflected in a swelling number of unemployed…(and) we cannot exclude higher precautionary savings dampening consumption.”

A return to where the economy was before the outbreak earlier this year is not expected until at least end-2022.

That comes despite the European Central Bank’s planned 1.35 trillion euros of pandemic-related additional asset purchases and an historic 750 billion euro recovery fund from the European Union due to kick in next year.

But the concern is that no new stimulus is on the horizon, other than national governments extending worker furloughs put in place early this year as they struggle with soaring debt. [Reuters]

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