Not out of the woods yet: How will the latest Covid-19 wave affect the Euro area's economy?

Over the past month, the Euro area has faced a severe outbreak of new Covid-19 cases. Regional heavyweight Germany logged a record 68,049 new cases on 23 November, while the Netherlands has also seen a record number of new cases in recent weeks. Central and Eastern Europe has been hit especially hard, with the region’s low vaccination rate placing significant pressure on local health systems.

The spread of the virus across the continent is likely linked to colder weather forcing more individuals to stay inside, where it can spread more easily. Moreover, looser restrictions, increased travel, significant pockets of vaccine hesitancy and weakening immunity are all helping to accelerate the transmissibility of Covid-19. The rise in cases has put considerable pressure on authorities to take action, which raises the possibility of fresh lockdown restrictions before a busy holiday season. In Austria, authorities have already decided to reintroduce a nationwide lockdown, despite public protests and nearly 65% of the population being fully vaccinated. Meanwhile, Germany has introduced restrictions on unvaccinated residents, similar to a host of other countries in the region that have decided to keep unvaccinated individuals out of certain public venues such as restaurants and bars.

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Author: Steven Burke, Economist

Date: November 26, 2021