As Virus Cases Rise in Europe, an Economic Toll Returns

By Patricia Cohen and Melissa Eddy

A series of restrictions, including a lockdown in Austria, is expected to put a brake on economic growth.

Austria has imposed the strictest measures, mandating vaccinations and imposing a nationwide lockdown that began on Monday. But economic activity will also be dampened by other safety measures — from vaccine passports in France and Switzerland to a requirement to work from home four days a week in Belgium.

“We are expecting a bumpy winter season,” said Stefan Kooths, a research director of the Kiel Institute for the World Economy in Germany. “The pandemic now seems to be affecting the economy more negatively than we originally thought.”

The Christmas market in Frankfurt on Monday. Some German states have imposed partial lockdowns. Credit…Kai Pfaffenbach/Reuters

The tough lockdowns that swept Europe during the early months of the pandemic last year ended up shrinking economic output by nearly 15 percent. Buoyed by a raft of government support to businesses and the unemployed, most of those countries managed to scramble back and recoup their losses after vaccines were introduced, infection rates tumbled and restrictions eased.

What was not expected was a series of tough government restrictions. A highly contagious strain — aided by some resistance to vaccines and flagging support for other anti-infection measures like masks — has enabled the coronavirus to make a comeback in some regions.

“The lower vaccination rates are, the gloomier the economic outlook is for this winter term,” Mr. Kooths said.

Roughly two-thirds of Europe’s population has been vaccinated, but rates vary widely from country to country. Only a quarter of the population in Bulgaria has received a shot, for example, compared with 81 percent in Portugal, according to the European Center for Disease Prevention and Control.

Before they were ordered shut, stores in Austria were already suffering a 25 percent loss in revenue for November compared with the same period in 2019, the country’s retail trade association said on Monday. Although the last shopping Saturday before the lockdown — stores in Austria are closed on Sunday — was stronger than that day two years ago, the group said, it would not be enough to make up for the losses expected in the coming weeks.

Still, the overall outlook is not nearly as dire as it was last year. Although several analysts have shaved their forecasts for October, November and December, growth is still expected to be positive, with the yearly increase hovering around the 5 percent mark. Jobless rates have dropped, and, in some areas, businesses are complaining of labor shortages.

Austria’s response, to impose a three-week lockdown — which shuts all stores except those providing basic necessities, allows restaurants to serve only carryout and requires people to stay home except for essential activities — is not necessarily a bellwether of what other governments across Europe will do. Leaders in France and Britain signaled last week that they were not planning new shutdowns.

“We’re not at that point,” Sajid Javid, the British health secretary, said on Sunday. While there can’t be complacency, he added, he hoped people could “look forward to Christmas together.”

st at Pantheon Economics, said that while it was clear that restrictions and lockdowns had a significant and immediate impact on the economy, limited and intermittent closings — like those that already exist in some countries — were less likely to put a huge dent in overall growth.

Much more difficult to assess, though, are the consequences of widespread restrictions on the unvaccinated or vaccine mandates. For individual businesses and regions, however, even the current limits could prove devastating.

The weeks leading up to Christmas Day are among the most important shopping days in Austria and Germany, where people gather at outdoor markets to eat, drink and buy gifts. The region’s traditional holiday markets, which normally open from late November until Dec. 24, are also an important tourist draw, and generate wider revenue through hotel bookings and other cultural events. Last year, many markets were completely shut down, so sellers and buyers were looking forward to this year.

In Vienna, the market on Maria Theresien Platz opened last Wednesday, its wooden stalls decorated with evergreen boughs and fairy lights. But the vendors were forced to shut down after only four days.

Maria Kissova stood amid piles of tablecloths, pillow covers and lace ornaments she had brought in from neighboring Slovakia, where she employs several women to sew the crafts. This year was her first time coming to Vienna, a trip that required months of planning and paperwork. With the lockdown, she faced the prospect of only several days’ worth of shopping, if the market is allowed to reopen as planned in mid-December.

For Daniel Zieman, who ran a gift stand across the square between Vienna’s Natural History and Art History Museums, the story was the same. But he worried about the staff at the restaurant serving typical Austrian fare that he runs on the edge of town, many of whom count on the tips coming in from waiting tables in the normally busy season. Lost tips won’t be included in the government subsidies that will help keep people afloat.

“Many of our staff have children, and you count on a certain percent from these tips every month,” he said. “That won’t be there.”

The holiday season is when many restaurants do their biggest business, with companies holding end-of-year events, he said. “That is really good business, with 30 to 40 people who eat and drink and drink again and eat again. It’s a real shame,” he said.

The Czech Republic and Slovakia have also imposed new restrictions. In Germany, some states have introduced partial lockdowns, and starting Wednesday, the unvaccinated will be required to show a negative Covid-19 test before going to work.

By the end of this winter, pretty much everyone in Germany “will be vaccinated, cured or dead,” Jens Spahn, the health minister, said on Monday.

A nationwide closure in Germany, the continent’s largest economy, is unlikely at the moment, but Carl B. Weinberg, chief economist at High Frequency Economics, warned that one there would drag down all of Europe. “If Germany locks down, Europe is going to go back into recession,” he said.

Nearly 70 percent of the French population has been double vaccinated, and the country imposed a health pass this year requiring people to show proof of vaccination to travel on trains and planes and enter restaurants, cinemas and large shopping centers.

The government will now require a booster dose for people 65 or older for the pass to remain valid, and France’s Health Defense Council will meet on Wednesday with Mr. Macron to discuss other options to slow the spread of the coronavirus.

The government, a spokesman said this week, is bringing “the weight of restrictions to bear on nonvaccinated people rather than vaccinated people.

Courtesy: The New York Times