Europe insists on restrictive measures in an effort to contain the third wave of the pandemic, while the US and Great Britain are expanding their vaccination’s program to accelerate the return to normality. The continued restrictions in the first quarter of 2021 could result into a further downturn in growth rate urging the economy back into recession, although into a milder one than it seemed at the beginning of the pandemic in the first half of 2020.

After Germany’s announcement of extension of the lockdown until April 18, France also proceeded to a four-week lockdown. Furthermore, Sweden announced a suspension, until May 3, of its plan to lift the restrictions due to the escalation of cases. Vaccines are an additional deterrent, as it is clear that Europe is significantly behind the USA and the Great Britain at the vaccination rate.

In this context and despite the recent rise in inflation, the ECB’s policy interest rates are expected to remain unchanged over the next two years with the ECB continuing to support the economy through its asset purchasing program. A series of national and community loan facilities, including grants, have been implemented to protect the economies.

However, the extension of the restrictive measures combined with the delays and problems in the vaccination process, necessarily lead to an extension of the measures supporting the economies and as a result to an increase in the deficits in the Eurozone countries. Germany, Italy, Spain and France are expected to announce an increase in their lending programs for this year, while other countries will follow.

The outlook for the current year highly depends on vaccines availability as well as the emergence of new variants of the virus that may require prolonged restrictions.