Europe is blundering towards Covid reopening
|View in browser||Tuesday April 27 2021|
|By Ambrose Evans-Pritchard|
and Jeremy Warner
|Europe is frighteningly close to another Covid blunder|
By Ambrose Evans-Pritchard,
WORLD ECONOMY EDITORIf Boris Johnson really did say “let the bodies pile up in their thousands” in a moment of exasperation, this was not in fact Government policy.
Bar the language, it is the current policy of France, Italy, and several other EU states, and a number of impatient German Länder as well. While it is a different story in every country, and none are callous, Europe tolerated the “pile up” of 3,000 bodies a day during the peak of the third wave earlier this month.
The region mostly refused to follow the UK into another full lockdown earlier this year even though it had weeks of prior warning and the British experience of the B117 variant before its eyes. It acted too late. Now one country after another is reopening in a rush, against scientific advice, before cases are under control.
Professor Andrea Crisanti from Padova University, the epidemiologist behind the vaunted Veneto containment last year, foretold what would happen in Italy this spring if the country dropped its guard, and he is now warning that decisions are being made that threaten the summer as well. The underlying picture is scarcely different in France, or Spain. “Reopening is an epic stupidity. The numbers are not low enough to open safely,” he said.
If he is broadly right, Europe’s second tourism season is in the balance and full recovery may be pushed out for several more months, with an ever rising risk of economic scarring and pent-up insolvencies, including sovereign distress.
Prof Crisanti contrasts the careful step-by-step reopening in the UK with the headlong dash in parts of Europe where intensive care units in hospitals are still near breaking point. The daily death toll is running at an Airbus A320 crash every day in several countries.
“Look at Great Britain. It has relaxed restrictive measures in a similar way to Italy, with the difference that England has 30 deaths a day, cases are down to 2,000, and 70pc of the (adult) population is vaccinated. We have vaccinated 15pc, with protection at around 12pc. May we ask, which government has shown greater respect for health?” he told the L’aria che tira TV programme. This is not to say that Europe’s leaders are necessarily wrong in principle. France’s Emmanuel Macron took an explicit decision last January to reject the demand of the French scientific council for an immediate lockdown, and more broadly to reject zero-Covid ideology tout court. “France is not governed by scientists” was the Jupiterian word from the Élysée Palace.
Events forced him into a partial lockdown anyway. But he was weighing up the conflicting variables: the collateral damage to body and mind; the loss of education; the economic damage; and the insidious effect of allowing the suspension of civil liberties to become routine.
He knew that pandemic fatigue was undermining social consent for lockdowns and that curbs were becoming unenforceable. Like his technocrat twin, Italian premier Mario Draghi, he is now gambling that rising vaccination and immunity will pull down the death trajectory and vindicate his latest decision just in time.
What is striking is how many commentators in France regard this as a legitimate policy choice based on a subtle intertemporal reading of forward-looking curves. But while I agree with them that a zero-death policy in a large Western European country is posturing and intellectual infantilism, I think Mr Macron, Mr Draghi, and others, are jumping the gun by several weeks and making an unforced error that will do further economic and social damage. It is their credibility as clever technocrats that is on the line.
Europe ought to be poised for a V-shaped economy. Fiscal relief is coming and the huge transatlantic gap in stimulus is narrowing. Mr Draghi is cashing in his immense (but perishable) prestige to launch a spending and investment blitz that would never have been tolerated by Brussels or the markets if it had come from any political party in Italy.
He is pushing the budget deficit to almost 12pc of GDP, higher than last year and the highest since the creation of the modern Italian republic. This too is a gamble, or a Hail Mary throw as they say in American football. It assumes that targeted investment will pay for itself with a leveraged multiplier, bringing down the debt ratio over time rather than driving it up, as occurred with the austerity shoved down Italy’s throat during the Trichet-Schauble Lost Decade.
Mario Draghi is betting on a €220bn stimulus package to revive Italy’s ailing economy Germany is opening the spigot. The deficit will jump to 9pc this year. The Netherlands has abandoned its earlier plans for premature tightening. Some €500bn of excess savings is pent-up and ready to go in the eurozone. All the stars are aligned for an imminent boomlet, even if it is weaker than the roaring recoveries in the US and the UK.
But for the reopening gamble to pay off, European states must first control the virus. A chorus of scientists has been warning in Gothic tones that to let rip now is to risk a repeat of the last three cycles of botched Covid management.
“It is much too soon. There are not enough people vaccinated to stop the virus,” said Prof Catherine Hill, doyenne of French epidemiologists. “We’ve passed the case peak of the second wave and we’re at 300 deaths a day, and now they’re lifting the controls. It’s a catastrophe.”
Covid patients in intensive care in France have been hovering near 6,000, and even risen slightly over the last two days. She disputed that there can be any plausible trade-off between health and the economy. “We will lose on both,” she said.
Premier Jean Castex said on Sunday that the Brazilian and South African variants were scarce and in “regression”. He was ill-advised. These P1 strains are surging in greater Paris, rising from 4pc to 9pc of all cases over the last two weeks. The rise has been exponential in the Creuse (21pc) and Haute-Saône (23pc), see chart below.The figures may be higher by now because France does less genomic sequencing than Wales. While alarmism over new variants can be overdone – there is still T-cell immunity from vaccines and past infections, even if antibodies fall off – it is courting fate to let them spread unchecked. Judging by the spontaneous rave party at the Parc des Buttes-Chaumont in Paris over the weekend, spread they will.
The French scientific council has called for stockpiling of the Moderna vaccine – seemingly the best so far for these strains – warning that cases could get out of hand over the summer. Prof Mahmoud Zureik from the University of Versailles said the French government is making up policy on the hoof and is “in denial” in lifting curbs at a time when critical care demand exceeds capacity in 60 French departments.
So is Mr Draghi, who opened up on Monday across 15 of Italy’s 21 regions taking what he called a calculated risk. “Unfortunately, as I have to keep repeating: the virus doesn’t negotiate,” said Professor Massimo Galli from Milan’s Sacco Hospital. Prof Crisanti is harsher, accusing Italy’s leader of dilettantism.
Premature reopening is particularly hazardous in Italy because large numbers over 80 years old have still not been vaccinated. The former Conte government steered the doses to front-line workers instead, a valid choice had they been able to control who really was on the front-line. Instead doses went to friends of friends in their forties and thirties.
Angela Merkel’s Germany is pulling in the opposite direction to the Club Med bloc, activating the country’s “emergency brake”. It is tightening measures with a clear goal of pulling the seven-day incidence rate below 100 new infections per 100,000 people. Germany is effectively biting the bullet through to the end of June and deferring recovery until the second half.
I suspect that Chancellor Merkel will be rewarded with a better economic outcome as a result. It is Mr Macron, Mr Draghi, and euro-technocrats who may have some explaining to do if their calculated bet goes awry.
As for Boris Johnson’s loose tongue, one thing I have learned over 40 years in journalism is never pay much attention to what people say. Watch what they do. Other newsletters you might like…Investor | Investment analysis, advice and expert opinion. Sign upCity Intelligence | Your essential round-up of the biggest corporate stories. Sign upTechnology | Your guide to tech news and trends. Sign up Do European leaders have any choice but to reopen their economies?By Jeremy Warner,
ASSISTANT EDITOREurope’s leaders are taking big risks in opening up their economies before vaccine rollouts are anywhere near delivering herd immunity and while infection rates are still relatively high. We only have to look at what is happening in India and many other developing countries to see that the pandemic is still far from over.
The present wave may have peaked as far as Europe is concerned, but absent of continued travel restrictions, the chances of a resurgence later this year are still relatively high. Is it not unwise, given how far behind most European nations are both on vaccines and on squashing the sombrero of infections to be opening up quite so soon? Perhaps so, but my question is this: do they actually have any choice in the matter?
Widespread mistrust in political institutions and leaders on the Continent has fed a potentially lethal combination of lockdown scepticism and vaccine hesitancy. The holiday season approaches, with Northern citizens desperate for the sunshine of the South, and the cash starved South equally keen to welcome them back. Compliance with strict social distancing rules and travel restrictions is increasingly hard to maintain; the politicians seem to have adopted the view that there is no point in even trying.
Dutch riot police face off with protesters demonstrating in Amsterdam last month against their government’s handling of the Covid-19 pandemic CREDIT: AFPIn this sense, Europe is not so very different from the US, where effective lockdown has proved equally hard to sustain for long. Like the US, there is moreover no uniformity of approach between member states.
If a country as apparently solidly grounded as Holland can find itself rejecting 11m doses of the AstraZeneca/Oxford University vaccine – not as the Health Minister claimed because it has plenty of viable of alternatives, but because its citizens refuse to take it – you know that there is something rotten in the heart of Europe.
The proportion of Dutch citizens that have received at least one dose of a Covid 19 vaccine hovers at little more than 20pc. Similarly with France. Germany isn’t much better at 25pc. Just to put that in context, the UK is at more than 50pc, and the US at over 40pc. Furthermore, all three European countries still have a reproduction rate of more than one; each person infected will pass it on to more than one additional person.
All three also still have relatively high levels of new cases. The German daily rate per million of population is 252.8, France 437.3 and the Netherlands 481.6. In the UK, the rate is now down to as little as 36.6. Even so, all three Continental countries are in the process of easing their restrictions. Possibly, they’ll get lucky. That’s what they are banking on, and on balance, that would be my bet too. If like in the UK, the pandemic is now effectively over, we can expect a strong bounce back in the economy from here on in, following much the same trajectory as the US and the UK, if not quite as strong. Since most European countries suffered a smaller economic collapse than Britain in the first place, some of them might even beat the UK in returning to pre-Covid levels of GDP.
Get this wrong, however, and from the sun-soaked beaches of the Costa del Sol to the industrial heartlands of the Rhine, Europe will be in all kinds of trouble. To misjudge lockdown easing would be a triple whammy for European leaders. Already credibility is shot to bits by the debacle of the EU’s vaccine strategy; confused and misleading messaging over vaccine safety has compounded the problem; to open up only to spark another wave would be the final straw.
That said, the next wave will in all probability not be nearly as bad as the first two; that tends to be the way of contagious disease. But you only have to take a look at what’s going on in India, and less well reported, now Colombia, to see that this is not yet over. The opening up gamble may yet pay off, but it is not one made from a position of strength.
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