PARIS – Boston and New York are reopening for business, but Paris, Rome and Berlin are shuttered again amid a third wave of the coronavirus pandemic.
While a quarter of Americans now have at least one COVID-19 shot in their arms, only about 10% of Europeans do. And while a raft of analyses predict the U.S. economy will rebound strongly this year, forecasts for the 27-member European Union are middling.
While the coronavirus has taken a heavy health toll on both sides of the Atlantic, recovering from its economic devastation promises to be less egalitarian.
Europe’s slow vaccination rollout, complications with the AstraZeneca vaccine, more modest stimulus measures and a new upsurge in the virus may widen its near-term growth gap with the U.S., analysts say.
Differences will also be sharp across European regions and sectors, they say, with tourist-dependent southern countries like Greece, Malta and Spain bearing the biggest economic hit.
Still, Europe also has some key assets, they say, including generous social welfare systems that have helped cushion the pandemic’s fallout. Even so, the coming months will be challenging.
“There is a case to be made that what we’re doing now might not be enough for Europe to return to its pre-pandemic growth path,” said Niclas Poitiers, research fellow at the Brussels-based Bruegel economic research group.
Statistics back up the transatlantic disparities. Fitch Ratings this week upgraded its 2021 U.S. growth forecast to 6.2%, up from 4.5% a few months ago, while keeping Europe’s unchanged at 4.7%. Earlier this month, the Paris-based Organization for Economic Cooperation and Development (OECD) offered an even rosier prediction of 6.5% U.S. growth, riding on the back of a fast vaccine rollout and the Biden administration’s $1.9 trillion stimulus plan.
By contrast, the OECD predicted just a 3.9% growth in 2021 for the 19-member eurozone area, while the EU’s own nearly $890 billion recovery fund is a longer-term measure, and far smaller than Washington’s.
Meanwhile, the U.S. Federal Reserve projects America’s jobless rate will fall to 4.5% this year — nearly half that forecast for the EU by its statistical agency.
Vaccinations key to rebound
Vaccination is key to a global rebound, economists say, and Europe’s vaccine rollout has been slow for a mix of reasons, including the European Commission’s late start and price-conscious ordering.
“Saving money on the vaccines was an absolutely foolish way to economize,” said Scott Marcus, a senior analyst at Bruegel, who estimates the EU’s strategy is costing the bloc billions of dollars weekly in lost growth.
“Getting vaccines into arms as quickly as possible is the right thing to do,” he said.
European leaders say they will make up lost ground in the weeks ahead, despite slow deliveries of one of its biggest suppliers, AstraZeneca, and questions about the shot. Brussels promises 70% of adults will be inoculated by summer’s end. This week it announced it would curb vaccine exports through next month to ensure more supplies at home.
Yet for now, it seems the coronavirus is winning in many places. Countries such as France and Germany are shutting nonessential stores and services as they confront third waves of the pandemic.
“New variants are ramping up faster than vaccinations can compensate for them,” Marcus said. “I think that’s what we’re seeing in the numbers.”
While predicting upward growth in Asia and Latin America, a new assessment by Moody’s Analytics suggests some European countries risk recession in the coming months because of “a largely conservative approach to easing restrictions.”
A lost year, but also support
In France, the economic fallout has hit younger people hard. Students, who have lost part-time jobs and internships, are heading to food banks and are floundering under unpaid rents. A report by the Observatory of Inequalities found people under 30 represent nearly half of the French poor.
“The COVID wave has left a number of young people in a spiral of poverty,” Pascal Paoli, regional director of the Abbe Pierre Foundation charity, told French radio.
Workers in the tourism and cultural sectors are also struggling. A growing number of shuttered French theaters are now occupied by unemployed artists and others demanding more generous government benefits.
“We’ve had a lost year,” singer Joanna Malewski, 38, said. “For the moment, we have unemployment support until August. After that, we don’t know what will happen.”
Playing the kora, a string instrument from his native Senegal, on a sunny afternoon, Parisian Mamadou Traore said he can just make ends meet, thanks to unemployment benefits and income from teaching music to young children. It has been months since his band has been able to perform.
“We manage,” he said. “Others have it harder.”
Experts say Europe’s welfare system has been a key safety net for its struggling citizens — and may also help spur the region’s recovery. State subsidies have been a lifeline to the unemployed and also have allowed workers to keep their jobs, despite business closures.
“It also means that as recovery ramps up in specific sectors, companies don’t have to be looking around for qualified workers again, with all of the losses that implies,” Marcus of Bruegel said.
Europe’s recovery promises to be patchy in the months ahead, experts say, varying sharply by sector and region. In France, for example, recent findings show that Paris — the country’s economic hub — and tourist-dependent Corsica have been hit hardest by the pandemic.
“In southern Europe, the tourism sector accounts for a significant share of the economy. In some regions, it’s the main economic activity,” said Poitiers of Bruegel. “So long as the vaccination rollout remains insufficient, these parts of the economy will not recover.”
For now, Poitiers remains optimistic that the EU’s vaccination pace will pick up and summer tourism — and tourist-dependent economies — can begin rebounding.
Others are less optimistic.
“I think the summer is shot, unfortunately,” Marcus said.