No less of an expert than the chief economist of the European Central Bank says the raft of new COVID-19 lockdown announcements, including Germany, won’t derail the eurozone economy.
“It’s important to emphasize when we made our recent forecasts a couple of weeks ago we did allow for some extension into the second quarter,” said Philip Lane, the ECB chief economist, in an interview with CNBC. “So the fact now we are seeing decisions lockdown measures extended into April is not too surprising.”
That forecast calls for 4% growth in 2021, after a 6.6% deterioration in 2020. The median forecast is for 4.3% growth, according to a FactSet compilation of 51 estimates.
Lane did point out that the European Commission is expecting an acceleration in COVID-19 vaccination in the second quarter. “It’s a contest between progress and vaccinations and other medical progress versus the near-term challenge of trying to get this virus under control,” said Lane.
Lane’s comments came as Germany extended its lockdown measures by another month in what will effectively shut down public life over Easter. The U.K. extended a foreign travel ban until July, allowing for £5,000 ($6,890) fines for movement not needed for work or family reasons.
Analysts at Citi expect the German lockdown to be extended again. “Given the higher transmissibility of the now dominant B.1.1.7 virus variant, we are skeptical that Merkel and the 16 states will be able to ease the restrictions at the next meeting on April 12,” they said in a note to clients.
In financial markets, there is only the slightest pricing in that the recovery won’t be as strong as hoped. The Stoxx Europe 600 travel and leisure index SXTP, -1.23% — with companies including InterContinental Hotels IHG, -3.12%, Ryanair RYAAY, -1.65% and Lufthansa LHA, -3.98% — has doubled from its March 2020 lows, though it is now down 3% from its highs.
The euro EURUSD, -0.75% traded below $1.19, and the yield on the benchmark 10-year German bund TMBMKDE-10Y, -0.337% has drifted deeper into negative territory after rising as high as -0.23% earlier in the month.