Just as the U.K.’s House of Commons was debating this week plans for another strict lockdown until mid February, a government minister was already warning that the Covid-19 restrictions would in fact remain in place until March, and only gradually lifted thereafter.
Germany, meanwhile, the European country that has best dealt with the coronavirus disease, with a death toll at less than half that of neighboring France, and about a third of the U.K.’s, has tightened its restrictions further, and extended its own lockdown by another three weeks, until the end of February.
As European governments come to terms with the reality that, whatever hopes vaccines may hold, the pandemic will keep raging in the coming months, they must also start considering what economic policy measures they will have to take to support households and businesses through the new crisis.
The fiscal stimulus measures decided last year were designed to deal with or repair after the first wave. They will prove insufficient to help Europe’s economies cushion the impact of the second blow.
More needs to be done. And the risk for governments in coming weeks, as they start worrying about mounting debt load, isn’t that they do too much, but too little.
Some have begun to acknowledge this, and act. The U.K. Chancellor of the Exchequer, Rishi Sunak, has announced a £4.6 billion ($6.2 billion) grant program to businesses most affected by restrictions—notably restaurants and bars and the retail businesses.
But in most other major European economies, governments still seem happy to spend the money they dedicated last year to fighting the pandemic, regardless of the unexpected strength of the current wave. That is unlikely to be enough, if only because the recovery has been delayed to the second half of 2021, at best. In the U.K., for example, Bank of America analysts have recently revised down to 3.1% (from 4.7%) their growth forecast for this year, but upgraded to 6.7% (from 4.8%) their predictions for 2022.
The current restrictions are different from the March-to-May lockdowns in force in most of Europe last spring, for two reasons. The first is that vaccination campaigns now allow governments a glimpse at the end of the tunnel. The second is that households and businesses are more prepared than they were last year, and have learned to adapt.
According to a calculation by Bruegel, the Brussels-based think tank,…
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