LONDON – European countries could see “tremendous growth acceleration” in the summer as vaccinations step up, Dutch Finance Minister Wopke Hoekstra told CNBC.
European economies are battling one of the deepest shocks in history. The coronavirus pandemic halted much of Europe’s economic activity and the introduction of the Covid-19 vaccine has been bumpy. Eurozone member states contracted by almost 7% in 2020 and severe social constraints remain, dampening the outlook for 2021.
The European Commission, the executive branch of the EU, has assessed the economic recovery more negatively and has lowered its GDP forecast for the year from 4.2% in November to 3.8%. However, the Dutch CFO is confident that economic activity will pick up in the summer.
“I think we have to be realistic, but there is also reason to be a little more optimistic than the Commission is in its forecasts because if I look back on what we saw after the first wave of Covid, we have it in the Netherlands seen, but also an enormous acceleration in growth in many other countries, “Hoekstra told CNBC exclusively on Monday.
Most European nations introduced their first bans in March 2020, but saw activity pick up in the third quarter of the year. In warmer temperatures and weaker social restrictions, restaurants, shops and bars could be reopened after the first closings.
Covid is taking longer than expected.
Dutch Minister of Finance
This meant that after a decline of around 11% in the second quarter, the euro zone grew by around 12% between July and September.
“It will be a few more weeks, or possibly a few more months, but I am optimistic about the phase just before summer,” said Hoekstra.
“I think then with a much higher vaccination level, with the summer on the continent, with everything we can do in terms of tests … I am actually pretty optimistic that this will be the phase in which we are slowly but surely return normal, “he added.
“Too early to say”
Hoekstra has long been an advocate of fiscal caution. He disheveled some feathers last year because he reportedly asked European authorities to investigate why some southern European states no longer had fiscal space to cope with the pandemic.
Hoekstra, however, said he supports loose fiscal policies in the face of the “extraordinary” crisis.
The eurozone actually froze its budget targets after the pandemic. This means that countries do not need to reduce their deficits to below 3% of their GDP, or their debts to below 60% of GDP.
When asked when these should be restored, Hoekstra said, “It’s too early to say.”
“Covid is taking longer than expected … and it’s hard to say when the change will come, but definitely from my point of view, not this calendar year,” he said.