Europe gears up for more economic pain as Covid refuses to die down

There’s further economic pain ahead for European countries as France and Germany announce new nationwide lockdowns and other governments consider doing the same.

The latest measures to address the second wave of Covid-19 infections in Europe could lead to higher unemployment, the permanent closure of many businesses and even more national debt.

“Scarring will occur with each iteration,” analysts at High Frequency Economics said in note on Wednesday about the new lockdowns.

“Businesses and households will fail, increasing the number of jobs that will never come back at any interest rate and with any level of fiscal stimulus.”

French President Emmanuel Macron announced Wednesday a second nationwide lockdown starting Friday, with only schools and factories remaining open — in contrast to March, when these were also shut.

The decision delivers a new blow to restaurants, bars, cinemas and retailers, many of which were only just starting to get back on their feet.

ECB hints at more stimulus in December

The European Central Bank (ECB) held off from strengthening its stimulus programs despite growing concern that a renewed surge in Covid-19 cases could stall the economy's recovery from the deep downturn in the first part of the year.

But the ECB signaled that more stimulus could be coming at its December meeting, given that risks are “clearly tilted to the downside” and new staff projections would make possible “a thorough reassessment.” The bank on Thursday made no change to its 1.35 trillion ($1.58 trillion) pandemic emergency bond purchase programme, which pumps newly created money into the economy to keep credit flowing to businesses. AP | PTI