Slow Pace of Vaccinations Pushes Europe Toward Second Economic Slump
The new year was supposed to bring improved economic fortunes across Europe, as coronavirus vaccines made their way into the bloodstream.
Instead, the eurozone economy shrank at the end of 2020, according to official figures out Tuesday, raising fears of a double-dip recession and demonstrating that the pandemic is likely to remain a force for at least a few more months in the face of the European Union’s pronounced failure to distribute vaccines.
Economic output in the 19 countries that belong to the eurozone fell 0.7 percent in the fourth quarter from the previous quarter, according to a preliminary estimate by the European Union’s official statistics agency. For the full year, overall output fell 5.1 percent.
Europe is now likely to suffer continued economic contraction over the first three months of 2021 and perhaps into the early part of the next quarter, as governments are forced to maintain restrictions on commercial life, according to a report released Tuesday by Oxford Economics in London. “There is definitely a risk that vaccine distribution continues to be disappointing,” said Tomas Dvorak, a eurozone economist with Oxford Economics. “There is risk that the second quarter will also get quite bad.”
The failure of European governments to get vaccines to their citizens could create a political backlash, fueling resentment toward Brussels and souring the already uneasy relations among the 27 countries that belong to the European Union. Competition for vaccines has already strained the bloc’s relations with Britain. “We have to watch the potential political consequences,” Holger Schmieding, chief economist at Berenberg Bank in London, said in a note.
Previously, Oxford and other economists had forecast stagnation for the first quarter of the year, followed by a marked improvement in the spring. That view was guided by the assumption that vaccines would be distributed widely, allowing authorities to lift restrictions imposed to choke off the spread of the coronavirus. As people returned to shops, restaurants and holiday destinations, and as factories resumed production, economies would again expand.
That outcome now appears set for a delay as Europe struggles to secure and distribute vaccines. The eurozone now faces its second recession in six months after its economy shrank in the first half of 2020. European factories have largely adapted to the pandemic and are operating almost normally, but people whose jobs depend on face-to-face contact are suffering. More than half of Germans who work in hotels or restaurants, about 600,000, are on government-subsidized furloughs and effectively unemployed, according to the Ifo Institute in Munich, a research organization.
Germany managed only meager growth in the fourth quarter of 2020, and the economies of Italy and France declined. All three remain in tight lockdown. Across the 27 states of the European Union, only 2.5 percent of national populations on average have received at least one dose of vaccine, while Germany, Italy, and France are all below that dismal mark.
Source: The New York Times