COVID-19 restrictions may lead to economic contraction in Europe, ECB’s De Cos says

Newly introduced restrictions to contain the coronavirus epidemic could slow economic recovery or even lead to a contraction in Spain and other European countries in the fourth quarter, European Central Bank policy maker Pablo Hernandez de Cos said on Wednesday.

Due to recent infection trends in Europe, there was persistently high uncertainty over the strength of the recovery in the final months of the year, De Cos told Spanish lawmakers in parliament.

De Cos, who is also Spain’s central bank chief, said that “the widespread implementation of new measures to contain the health crisis could lead to a significant slowdown in the expansion of activity, and even to a contraction, at least in some countries or sectors in the fourth quarter.”

With coronavirus infections testing the limits of the health system, the euro zone’s biggest nations have started to impose new lockdown measures last week, dealing a blow to a services sector that has yet to recover from a deep recession suffered during springtime.