Europe Economy

More restrictions expected in Europe as coronavirus spreads rapidly and rattles markets

Key Points
  • European countries are likely to impose more restrictions on public life in the coming days, analysts said.
  • France reported 10,569 new cases Sunday while the U.K., reported almost 4,000 new cases. Italy saw close to 1,000 new infections and Germany reported 1,345 new cases Sunday, and a further 922 cases Monday.
Pedestrians wear protective face masks while passing stores and cafes on Rue Montorgueil in Paris, France, on Wednesday, Aug. 26, 2020.
Bloomberg | Bloomberg | Getty Images

LONDON — European countries are likely to impose more restrictions on public life in the coming days as the number of daily coronavirus infections rises rapidly, analysts said.

France reported 10,569 new cases Sunday (down from more than 13,000 new cases reported the day before), Reuters reported, while the U.K., reported almost 4,000 new cases on Sunday. Italy saw close to 1,000 new infections and Germany reported 1,345 new cases Sunday, and a further 922 cases Monday. Spain has yet to post its weekend case tallies, but reported almost 4,700 new cases Friday.

On Monday, German Health Minister Jens Spahn said rising coronavirus infection numbers in countries like France, Austria and the Netherlands were "worrying" and that Germany would sooner or later import cases from there, Reuters reported. He added that countries like Spain had infection dynamics "that are likely out of control."

"Expect lots more restrictions over the days and weeks ahead, especially in Europe," Deutsche Bank analysts said in a note Monday. "The fact that the virus is already spreading quite rapidly is a big worry."

Coronavirus cases are rising so rapidly in Europe that the World Health Organization warned last week that there was a "very serious situation" unfolding in the region, calling the resurgence in infections a "wake up call."  Local restrictions have been imposed in various parts of Europe to quell outbreaks of infection, with parts of northern England in lockdown, for example, as well as areas of Spain's capital, Madrid. 

As cases rise, however, more drastic measures are being considered, with the U.K. among those mulling whether to introduce a second, "mini" national lockdown to act as what has been described as a "circuit breaker" to stop the virus spreading.

The country's government is also considering more restrictive measures such as a 10 p.m. curfew that would force cafes, bars and restaurants to close early. It comes as the U.K.'s chief medical officer and chief scientific advisor warned on Monday that if the current trend in rising cases continued, doubling every seven days, and no action were taken, the country could expect to see almost 50,000 new cases per day in mid-October.

Economic hopes fading

Thankfully, the tally of fatalities caused by the virus are lower so far, and there is hope that a second wave of the virus will not see as large a spike in deaths as the first outbreak in spring, Deutsche Bank analysts led by Jim Reid said. However, hopes that Europe's economy could bounce back, with the recovery taking a "V" form, are looking increasingly unlikely.

"It doesn't feel like fatalities are going to be as big as an issue as they were in the first wave but it really is hard to understand what the strategies of (European) governments are at the moment," the analysts said.

"They pretty much all don't want a further wide scale lockdown but they also don't want the virus to spread. It's not going to be easy to solve for both and as such it's going to be a pretty difficult few months ahead if September is seeing numbers as high as they are already."

The coronavirus developments have impacted European markets, with the pan-European Stoxx 600 index down 2% in early trade Monday. Rabobank strategists agreed that hopes of an economic rebound were fading fast.

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"With Coronavirus cases having surpassed the 31 million mark and almost 1 million deaths globally, the possibility that 'second waves' or indeed, first waves that were never actually brought under control will continue to weigh on the economic and policy outlook is all but certain, while earlier optimistic hopes for a 'V' (or perhaps even 'W') shaped recovery will continue to fade," they said in a note Monday.

Economists at Capital Economics said they do not expect full, national lockdowns, and government ministers certainly appear reluctant to restrict economic activity as severely as before. But they warned that consumer confidence could take another hit as the public in Europe could be forced to curtail social activity and work from home again.

"While we do not expect the current second wave of coronavirus infections to lead to new national lockdowns, it will deal a blow to business and consumer confidence," they said in a note Monday.

"Output looks set to remain below its pre-crisis level at least until the end of 2022, although there will be significant discrepancies between countries, with Germany set to fare substantially better than Italy or Spain."