Although the new COVID-19 cases are reported in almost every country in the world, Europe once again has become the epicentre of the pandemic. With more than 400,000 new cases every day, the World Health Organization (WHO)’s Europe region now accounts for around 70 percent of new global infections. As per the WHO, most of the 53 countries of its European region will be under high or extreme stress till March 2022. The cases of Omicron, the new variant of concern, have also been reported in Belgium, the Czech Republic, Denmark, Germany, Italy, the Netherlands and the United Kingdom.
This despite the fact that many West European countries have one of the highest vaccination rates in the world. Though rates vary between countries, 66 percent of European Union’s total population, and 77 percent of its adult population, is fully vaccinated. In the UK, 23 percent people have got even the third dose.
Apart from increasing use of booster shots, many European countries, including Austria, Slovakia, and the Czech Republic, have announced stricter curbs including lockdowns. Austria has also declared compulsory vaccination. Switzerland is conducting a referendum to decide restrictions. The European Commission has proposed its member states to activate the ‘emergency brake' on travel from affected African countries.
The formation of a Social Democrat government backed by Greens and Free Democrats in the world’s fourth-largest economy, Germany, could have boosted markets. With about 50,000 new infections every day, the first thing the incoming three-party government might have to decide about is new restrictions. Imposing these curbs are becoming difficult as citizens in many countries are demonstrating against possible new restrictions.
Europe’s COVID-19 surge, and discovery of Omicron cases have already started affecting fragile global recovery. New travel curbs, and fear of new restrictions have started impacting global markets, and oil prices. Travel and Christmas shopping in Europe, and elsewhere is likely to be affected.
Before the new surge, the growth outlook for most advanced economies, and emerging markets looked robust. In the continuing global economic recovery, Europe was expected to play an important role. Despite facing multiple challenges, the EU is still one of the major economies of the world. As one of the largest traders and investors, the EU is deeply integrated in the global economy. Productivity levels are still pretty high. It has huge capacities, and linkages to influence core institutions of global economic governance. The EU has also been a largest donor of development finance, and a leading player in global development architecture.
The European surge, and discovery of new variants has happened when the EU economy was rebounding faster than expected. Its economy was expected to grow at 5 percent in 2021, and 4.3 percent in 2022. Pandemic impact on the economy was weakening. In the third quarter of 2021, output and employment were back to the pre-pandemic levels (2019 Q4).
In fact, the surge in demand in the EU, and other large economies have been such that most economies are facing serious supply disruptions. Major worries were surge in energy prices, supply of raw materials, and microprocessors rather than vaccines, and consumer demand.
Economic sentiments in the European Commission’s business and consumer surveys were upbeat, and suggested lowering of uncertainty. Now this momentum from recovery to expansion is likely to be affected by the deteriorating epidemiological situation again in Europe, and elsewhere.
If European disruption lasts longer, it will start affecting the Indian economy soon. The EU, the UK, Switzerland, and Russia are India’s important trade and investment partners. Indians also travel to these countries in large numbers.
The economic recovery in both Europe and India had provided a new impetus to trade agreement discussions with the EU, and the UK. Despite regular international movement disruptions, significant travel is already happening between Europe and India. Now the European surge, and the Omicron variant have also heightened worries of another wave in India. Prime Minister Narendra Modi has asked officials to review earlier plans of easing curbs on international travel. The government also plans ‘rigorous screening and testing’ of all international travellers from ‘at risk’ countries.
The deteriorating epidemiological situation in Europe, and global worries about new variants has once again brought many issues concerning virus behaviour, and vaccine equity to the forefront. Although most analysts and policy makers talk about ‘post-pandemic’ robust economic growth, and new world order, the reality is that the pandemic is still unfolding.
Gulshan Sachdeva is Chairperson, Centre for European Studies & Coordinator, Jean Monnet Centre of Excellence, Jawaharlal Nehru University.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
