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Slowdown on the economic recovery in Europe

One by one, the signs of economic recovery in Europe are turning orange, even red. While the rebound has hitherto been very rapid, the counter-shock comes from three fronts: bottlenecks in supply chains, inflation eating away at purchasing power and, above all, a new pandemic wave with the return health restrictions, especially in Austria, Germany, Belgium, the Netherlands and Greece.

The slowdown is sharp enough that euro zone growth could be near zero in the fourth quarter, according to Andrew Kenningham of Capital Economics: « The worsening Covid situation in Germany means the country could be subject to much stronger restrictions soon, potentially reducing gross domestic product by 0.25% [PIB] of the fourth quarter in the euro zone. Even if other countries impose less draconian rules, consumer caution could cause the zone to stagnate in the fourth quarter.  »

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Since Monday, November 22, Austria has implemented a twenty-day containment. Greece now prohibits closed public places (bars, restaurants, gyms) to unvaccinated people. In the Netherlands, a health pass is again necessary.

Supply chain disruption

From a strictly economic point of view, it is above all the situation in Germany that is worrying, since it represents 21% of the euro zone’s GDP. Further restrictions are likely there. “We are in a highly dramatic situation, outgoing Chancellor Angela Merkel explained on Monday. What is in place is not enough. « 

These new restrictions come at a time when the economy was already starting to experience some hiccups. Across the Rhine, the IFO index, which measures business morale, fell in November for the fifth month in a row, from 97.7 to 96.5 points. This fall is all the more worrying since the survey of companies was carried out before the rebound of Covid-19, mainly during the first part of the month.

In France, the concern stems rather, according to INSEE, from the repercussion of the rise in the prices of raw materials by the industrialists.

« The risks of a decline in economic activity seem to multiply », warned Fabio Panetta, member of the management board of the European Central Bank (ECB), on Wednesday, during a speech in Paris, evoking the disorganization of supply chains. « This could soon be seen in GDP growth », he judges.

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