There is a recession in Europe as the pandemic intensifies in some regions

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A two-day video summit of European Union leaders starting today is faced with a surge in the COVID-19 pandemic in some countries as the continent’s economic troubles could worsen with the ongoing troubles of the bloc’s vaccination campaigns.

  • New infections are increasing in France, Hungary and the Czech Republic, although they are gradually decreasing elsewhere on the continent.

  • In contrast to the UK (28%) and the US (20%), only around 6% of the EU population have received a first dose of any of the vaccines to date.

  • A poll by the European Central Bank on Thursday found that banks in the euro area had tightened credit conditions last month amid concerns about the financial condition of some of their customers.

  • The chief economist of the ECB said in a speech on Thursday that maintaining “favorable financing conditions” in the euro zone was the main reason that “sufficient monetary policy stimulus will remain essential in the coming months”.

Read: As virus variants continue to spread, EU governments are considering tough new travel bans

The outlook: The call for EU leaders to agree on a new round of massive fiscal stimulus modeled on the US is likely to be ignored this week.

This will add to the central bank’s loneliness as the main architect of the economic response to the pandemic. This makes the presence of Mario Draghi, the former ECB President, who became Italy’s Prime Minister two weeks ago and who will attend the summit as head of government for the first time, all the more interesting.

In the short term, there is a risk that the EU’s poor performance in organizing appropriate vaccination campaigns will worsen the divide in joint action to cushion the impact of the second wave.

EU leaders are expected to discuss the possibility of adopting a common standard for vaccination certificates or “passports” that would facilitate resumption of travel and tourism in the region. However, given their far-reaching views on the matter, it is unlikely that they will come to an agreement this week.

From the archives (March 2020): How Mario Draghi’s “Whatever It Takes” became Europe’s antivirus mantra

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