Slow Pace of Vaccinations Pushes Europe Toward Second Economic Slump

A double-dip recession in the European Union appears likely after the trade bloc reported a decline in economic output in the last quarter of 2020.

By Jack Ewing and Peter S. Goodman

The new year was supposed to bring improved economic fortunes across Europe, as coronavirus vaccines made their way into the bloodstream.

Instead, the eurozone economy shrank at the end of 2020, according to official figures out Tuesday, raising fears of a double-dip recession and demonstrating that the pandemic is likely to remain a force for at least a few more months in the face of the European Union’s pronounced failure to distribute vaccines.

Economic output in the 19 countries that belong to the eurozone fell 0.7 percent in the fourth quarter compared with the previous quarter, according to a preliminary estimate by the European Union’s official statistics agency. For the full year, overall output fell 5.1 percent.

Europe is now likely to suffer continued economic contraction over the first three months of 2021 and perhaps into the early part of the next quarter, as governments are forced to maintain restrictions on commercial life, according to a report released Tuesday by Oxford Economics in London.

“There is definitely a risk that vaccine distribution continues to be disappointing,” said Tomas Dvorak, a eurozone economist with Oxford Economics. “There is risk that the second quarter will also get quite bad.”

The failure of European governments to get vaccines to their citizens could create a political backlash, fueling resentment toward Brussels and souring the already uneasy relations among the 27 countries that belong to the European Union. Competition for vaccines has already strained the bloc’s relations with Britain.

“We have to watch the potential political consequences,” Holger Schmieding, chief economist at Berenberg Bank in London, said in a note.

Previously, Oxford and other economists had forecast stagnation for the first quarter of the year, followed by a marked improvement in the spring. That view was guided by the assumption that vaccines would be distributed widely, allowing authorities to lift restrictions imposed to choke off the spread of the coronavirus. As people returned to shops, restaurants and holiday destinations, and as factories resumed production, economies would again expand.

That scenario now appears set for a delay as Europe struggles to secure and distribute vaccines. The eurozone now faces its second recession in six months after its economy shrank in the first half of 2020.

European factories have largely adapted to the pandemic and are operating almost normally, but people whose jobs depend on face-to-face contact are suffering. More than half of Germans who work in hotels or restaurants, about 600,000 people, are on government-subsidized furloughs and effectively unemployed, according to the Ifo Institute in Munich, a research organization.

Germany managed only meager growth in the fourth quarter of 2020, and the economies of Italy and France declined. All three remain in tight lockdown.

Across the 27 states of the European Union, only 2.5 percent of national populations on average have received at least one dose of vaccine, while Germany, Italy, and France are all below that dismal mark.

By contrast, Britain — which aggressively purchased vaccines while relying on its national health system to distribute them — has injected at least one dose into more than 13 percent of the population. The United States has vaccinated about 7 percent of its population.

Economists assume that the European Union will succeed in substantially ramping up vaccination by spring, allowing restrictions to be gradually lifted. But the potential for further disappointment remains.

“The tough Corona restrictions have once again plunged the euro area economy into recession,” Christoph Weil, an economist at Commerzbank, said in a note to clients. He predicted that the downturn in the current quarter will be even steeper.

Covid-19 Vaccines ›

Answers to Your Vaccine Questions

Currently more than 150 million people — almost half the population — are eligible to be vaccinated. But each state makes the final decision about who goes first. The nation’s 21 million health care workers and three million residents of long-term care facilities were the first to qualify. In mid-January, federal officials urged all states to open up eligibility to everyone 65 and older and to adults of any age with medical conditions that put them at high risk of becoming seriously ill or dying from Covid-19. Adults in the general population are at the back of the line. If federal and state health officials can clear up bottlenecks in vaccine distribution, everyone 16 and older will become eligible as early as this spring or early summer. The vaccine hasn’t been approved in children, although studies are underway. It may be months before a vaccine is available for anyone under the age of 16. Go to your state health website for up-to-date information on vaccination policies in your area

You should not have to pay anything out of pocket to get the vaccine, although you will be asked for insurance information. If you don’t have insurance, you should still be given the vaccine at no charge. Congress passed legislation this spring that bars insurers from applying any cost sharing, such as a co-payment or deductible. It layered on additional protections barring pharmacies, doctors and hospitals from billing patients, including those who are uninsured. Even so, health experts do worry that patients might stumble into loopholes that leave them vulnerable to surprise bills. This could happen to those who are charged a doctor visit fee along with their vaccine, or Americans who have certain types of health coverage that do not fall under the new rules. If you get your vaccine from a doctor’s office or urgent care clinic, talk to them about potential hidden charges. To be sure you won’t get a surprise bill, the best bet is to get your vaccine at a health department vaccination site or a local pharmacy once the shots become more widely available.

Probably not. The answer depends on a number of factors, including the supply in your area at the time you’re vaccinated. Check your state health department website for more information about the vaccines available in your state. The Pfizer and Moderna vaccines are the only two vaccines currently approved, although a third vaccine from Johnson & Johnson is on the way.

That is to be determined. It’s possible that Covid-19 vaccinations will become an annual event, just like the flu shot. Or it may be that the benefits of the vaccine last longer than a year. We have to wait to see how durable the protection from the vaccines is. To determine this, researchers are going to be tracking vaccinated people to look for “breakthrough cases” — those people who get sick with Covid-19 despite vaccination. That is a sign of weakening protection and will give researchers clues about how long the vaccine lasts. They will also be monitoring levels of antibodies and T cells in the blood of vaccinated people to determine whether and when a booster shot might be needed. It’s conceivable that people may need boosters every few months, once a year or only every few years. It’s just a matter of waiting for the data.

Employers do have the right to compel their workers to be vaccinated once a vaccine is formally approved. Many hospital systems, for example, require annual flu shots. But employees can seek exemptions based on medical reasons or religious beliefs. In such cases, employers are supposed to provide a “reasonable accommodation” — with a coronavirus vaccine, for example, a worker might be allowed to work if they wear a mask, or to work from home.

If you have other questions about the coronavirus vaccine, please read our full F.A.Q.

Europeans had hoped for stability after a roller coaster year. In the second quarter of 2020, gross domestic product fell 11.7 percent as the pandemic took hold. Then growth rebounded 12.4 percent in the following quarter, the most on record, as lockdowns eased and firms adjusted to the crisis.

Economists do not expect such severe gyrations in 2021, but few expect the eurozone to recover its previous economic strength until 2022.

Often maligned for ponderous and bureaucratic ways in the face of crisis, the European Union dickered over contract terms with pharmaceutical companies, allowing more aggressive governments in London, Washington and elsewhere to lock up supplies. Many member states then opted not to purchase their full allocations from the European bloc.

If shortages and distribution bottlenecks persist, the economic recovery could be further stymied as governments maintain restrictions even longer.

Beyond the timing of the eventual return to economic growth, the botched European vaccination drive also threatens the magnitude of the recovery.

As hopes that vaccines would prove transformative give way to a more complex understanding of the continued risks of the pandemic, people may prove more cautious even after governments allow a return to shops, offices and entertainment venues. Companies that have figured out how to substitute Zoom calls for business travel may be slow in putting employees back on airplanes. If an aversion to risk persists, that could limit economic growth even after the pandemic is controlled.

Eventually, however, the vaccines will find their way into European arms and the infection rate will slump, allowing a return to places now shunned as vectors for the virus.

“I’m wary of saying we’ll get back to normal, because it’s quite hard to pin down what normal is,” Mr. Dvorak said. “But I think it’s reasonable to assume that consumers will resume their spending patterns.”

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