New COVID Wave Triggered By Delta Variant Could Stall Europe’s Recovery

Increasing numbers of Europeans infected with the Delta coronavirus variant could slow the region’s economic recovery and cause the necessity of new restrictions, the Financial Times (FT) reported on Monday (July 12).

Economists had been forecasting a bright economic outlook as lockdowns and other restrictions were lifted and increased spending and confidence boosted business activity. But the rising number of new cases because of the Delta variant has pundits worried. The infection rate is among the highest it has been for Europe since COVID-19 took hold.

“I’m a bit more nervous that it could get derailed by Delta,” Erik Nielsen, chief economist at UniCredit, told the news outlet.

UniCredit had upped its eurozone 2021 growth forecast to 4.5 percent from 4 percent, Nielsen told FT. Even though the number of new cases is not enough to trigger another round of lockdowns, he pointed to Google mobility data that indicated that it is “not so much the lockdowns that drive behavior but voluntary restraint.”

Spain now has the highest number of people infected with the new strain, moving past Portugal. German and French officials have warned people not to travel to those areas, an economic blow as the summer travel season kicks into high gear.

Pablo Hernández de Cos, governor of the Bank of Spain, said its economic forecasts were rooted in the assumption that tourism would kick into high gear in the summer and the health crisis would largely be in the past, he told FT.

Two weeks after lifting restrictions, the Netherlands is locking down again as far as restaurants, bars, nightclubs and live events. The country is dealing with a daily load of new cases that are close to 7,000.

Cyprus recently hit its highest level of new daily cases and has instituted capacity limits at hospitality and entertainment venues, according to FT.

The European Centre for Disease Prevention and Control put the new rate of infections at 51.6 per 100,000 on Friday (July 9). The prior week, the number of new cases per 100,000 was 38.6. The center is predicting an infection rate of 90 per 100,000 people by mid-August.

“There are reasons to be concerned, as the risks are there and there seems to be negative momentum,” Carsten Brzeski, head of macro research at ING, told FT. 

The spread of the new variant also is affecting the Tokyo summer Olympics, with a state of emergency in Japan that runs through Aug. 22. There will not be fans at the games, and more than 80 percent of Olympic Village residents will be vaccinated, including the 11,000 Olympians and some 4,400 Paralympians, officials, judges, administrators, sponsors, broadcasters and media.