Eurozone crisis: EU vaccine shambles to cost bloc €123billion by end of 2021

Pound to euro exchange rate fluctuates amid vaccine row

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European Central Bank chief Christine Lagarde talked of a “firm rebound in activity I the second half of 2021” just a couple of weeks ago. But now that a third wave of coronavirus cases is crippling the bloc, Italy, France and Germany, the EU’s strongest economies, are closing down again, the eurozone is set to suffer an even bigger catastrophe.

Credit insurer Euler Hermes estimated that the EU is now seven weeks behind its target to have 70 percent of the population vaccinated by the end of the summer, compared with five weeks in February.

It estimates the delay will cost the bloc’s 27 member states some €123billion by the end of 2021.

Charlotte de Montpellier, economist with Dutch bank ING told the Deccan Herald: “If you compare us with the US, where the outlook is so much more positive, we are falling further behind on the recovery because of this third wave.”

ING now expects eurozone growth of 3.0 per cent this year, down more than half a percentage point from its previous estimate.

Andrew Kenningham, chief Europe economist at Capital Economics, said he does not expect the eurozone to return to its pre-pandemic levels before the second half of 2022.

This would put the bloc one year behind the US.

He said: “We are revising down our forecast for eurozone GDP growth due to the resurgence of virus cases, slow pace of vaccination and extension of lockdowns.”

A jaw-dropping map put together by the International Monetary Fund (IMF), showed that as of 2021, French government debt reached an equivalent of 118.6 percent of French GDP.

Economists have warned this number is expected to get worse, reaching 120 percent by the end of the year.

The IMF figures reveal France’s debt is also running behind Brexit Britain’s, which stands at 111.5 percent.

President Emmanuel Macron said the additional “Covid debt” would be corralled in a separate account and paid down over the very long term.

However, while financing debt is not a problem for France, the burden and high pre-crisis levels of public spending do narrow Mr Macron’s scope for manoeuvre.

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European affairs journalist Paul Taylor wrote in his piece for POLITICO: “Whatever path he chooses will be the result of difficult economic choices.

“Macron will need an economic miracle, and a lot of luck with the pandemic, to keep his crown, and keep France, out of Le Pen’s hands.”

On the other side of the Channel, sterling pushed towards a one-year high against the euro as sentiment regarding the eurozone has continued to be stifled by its vaccine woes.

The pound increased by 0.39 percent versus the US dollar to 1.378 and was up 0.12 percent against the euro at 1.168.

UK investors were calmed by February’s retail sales figures which unveiled a partial recovery, with sales volumes jumping 2.1 percent against the previous month although were still 3.7 percent below the same period last year.

The FTSE 100 closed 65.76 points, or 0.99 percent, higher at 6,740.59 on Friday.

Michael Hewson, chief market analyst at CMC Markets UK, said: “European markets have finished a rather choppy week very much on the front foot, despite concerns about extended lockdowns in Europe, tighter restrictions between France and Germany, and the added wrinkle of the blockage in the Suez Canal.

“Investors appear to be adopting a glass-half-full mentality when it comes to sentiment as we look ahead to the end of the month, and the quarter next week.

“Today’s UK retail sales numbers for February bode well for a big rebound in consumer demand as we head into Q2, while a better-than-expected German IFO number also points to rising optimism about a global economic recovery even as Europe remains stuck in the mud spinning its reopening wheels.”

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