Virus flare-up and restrictions cast cloud over the European economy

A spike in COVID-19 cases across Europe that has triggered lockdowns and work-from-home advice in some locations threatens to sink the continent's economy, experts have said.

Andrew Kenningham, from Capital Economics, told The Telegraph newspaper the 19-nation eurozone, which uses the euro currency, could stagnate because of virus-related skyrocketing energy prices and the ceasing up of Germany's economy that would follow new virus restrictions.

High energy prices have already pushed up the cost of living in Europe and triggered the highest eurozone inflation rate since 2008.

"If, in the next week, the case numbers do really increase quickly, we could see some restrictions," Kenningham said as Germany recorded a record 66,884 COVID-19 cases on Wednesday.

With the nation's death toll edging past the psychological landmark of 100,000 this week, Salomon Feidler, an economist at Berenberg, told The Telegraph that Germany, which is responsible for around one-third of the eurozone's economic output, is also grappling with supply-chain problems attributed to the virus.

He said high infection rates "will probably hamper growth in the near term, due to renewed restrictions".

Feidler said pandemic-related restrictions in Germany have, so far, mainly been aimed at unvaccinated people, but "even vaccinated people are more hesitant to go out and spend".

The Munich-based Institute for Economic Research, which is known as the Ifo, said in its latest survey of 9,000 companies that German business confidence is at a seven-month low, due to fears that the pandemic's latest flareup will lead to restrictions that stagnate the economy.

"Supply bottlenecks and the fourth wave of the coronavirus are challenging German companies," The Guardian newspaper quoted the Ifo as saying.

The BBC noted that France is also seeing a big spike in COVID-19 cases and is set to reintroduce mandatory mask-wearing and other restrictions.

Smaller European economies are contributing to Europe's woes, with Austria returning to a full lockdown this week, and Switzerland, which has seen a 50 percent increase COVID-19 cases, urging people to work from home if possible.

The Czech Republic, Hungary, and Slovakia have all also reported record numbers of novel coronavirus cases this week.

The grim news has caused the euro to sink to its lowest level against the dollar for more than a year.

Bloomberg said on Thursday the German stagnation may have already begun, with its economy expanding less in the third quarter than initially expected, due to a sharp fall in investment spending.

Bloomberg said Germany's total output increased by 1.7 percent instead of the 1.8 percent predicted by Germany's statistics office in late October.

The nation's central bank, the Bundesbank, added that new data on the country's inflation rate that will be released on Monday could show a November reading of a little less than 6 percent.