European Countries Will Keep Implementing Restrictive Measures Amid Covid-19 Resurgence

Wary of returning vacationers spreading Covid-19, European officials will implement new restrictive measures soon to contain the virus. As I flagged in my daily update, several European countries such as Spain have already shown worrying signs with a sharp rebound in new daily confirmed cases. In addition, according to the European Centre for Disease Prevention and Control, twenty one European countries have crossed a key threshold of new coronavirus infections. Latest data showed that the countries have recorded cumulative 14-day infection totals higher than 20 per 100,000 inhabitants, considered an early alarm level by many health experts.

 

Bloomberg highlighted the concerns already prompted Spain and Italy to shut nightclubs and Greece to limit hours for bars and restaurants. More recently, Ireland’s coronavirus restrictions were “significantly” tightened after the number of cases increased rapidly over the past two weeks. Sky News reported that “All businesses have been told to let employees work from home, new limits have been placed on outdoor gatherings, and the government has warned people to avoid public transport to combat the spread of COVID-19.

 

 

In the meantime, the Dutch government issued stricter advice to the public regarding the coronavirus pandemic, telling people to continue working from home as much as possible should remain the norm even after September 1, and to not hold gatherings of more than six people. “I will get straight to the point: the developments surrounding the coronavirus are not going well,” said Prime Minister Mark Rutte.

 

Meanwhile, Bloomberg noted that German Chancellor Angela Merkel echoed this sentiment, ruling out any further loosening of virus measures and highlighting that “a doubling in the number of daily cases in Germany in the last three weeks must be addressed“. In this context, Germany is requiring people returning from heavily affected areas like Spain to quarantine for two weeks or present a negative test to thwart the disease from spreading in schools and workplaces. Reuters added that Austria expanded its travel warning for the Spanish mainland to include the Balearic islands, such as Mallorca and Ibiza. Elsewhere, Croatia is also facing an uptick in Covid-19 infections, which is raising concern over further countries introducing quarantines for those returning from holidays there.

 

 

In France, President Emmanuel Macron recently urged French citizens to remain vigilant as the virus is accelerating again. Furthermore, Labor Minister Elisabeth Borne announced that mask-wearing will be obligatory in most indoor work areas, including meeting rooms, lobbies and open-plan offices. The government is also encouraging employees to work from home whenever possible.

 

In a context where virus counts are rising around the continent, major economies (Germany, France, Italy) are likely to follow Spain (see University of Oxford data) and tighten their healthcare policies in the coming days.

 

 

The problem is that restrictive measures will probably affect economic recovery which has already lost traction since June. According to Bloomberg, “Hopes for a so-called V-shaped rebound have been dashed by indicators and high frequency data that show activity slowing markedly — or even plateauing — below pre-crisis levels.

 

 

All in all, it seems that risks linked to the healthcare situation remains clearly skewed to the downside in the short term and could raise the specter of negative GDP growth in 4Q20 if the trend worsens significantly in September.

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