Vaccine deployment in EU set to shift into high gear

The European Union is preparing to accelerate deliveries of vaccines against Covid-19 in order to create immunity among its populations, a prerequisite for the main economies of the euro area to return to their pre-pandemic levels as soon as possible. early 2022.

The outcome of the battle against the virus will depend on the immunity of enough people to prevent new strains from generating new outbreaks. In Europe, at the national level, many absolute rates of contamination and death are lower than those in the United States and the United Kingdom. On the other hand, European vaccination pace has fallen behind due to supply issues and concerns ad hoc regarding vaccine safety. The delays in immunization are as old as the technology itself. This week, Christie’s will auction a letter dated June 1801 from Doctor Edward Jenner to a London doctor, apologizing for a delay in the vaccine supply. Dr. Jenner was one of the pioneers of the smallpox vaccine, the first in the world.

However, the fate of the EU is about to change, as supplies are expected to increase substantially, from some 100 million doses in the first three months of the year to around 360 million doses in the second quarter. Enough to fully immunize, by July, more than 207 million people, just under half of the EU population (see graph). As of April 4, the Commission said the median level for the percentage of first doses given to adults was 16% across the Union.

For now, vaccination rates for the main EU members – Germany, France and Italy – remain less than half that of the United States, and are less than a quarter of that of the United States. UK. As of this writing, 47% of the UK population and 35% of US adults have received a first dose. This rate is 15.5% in France, 14.8% in Italy, less than 15% in Germany and 12% in Switzerland.

Political issues

With 1,896 deaths per million inhabitants, the United Kingdom recorded the highest mortality in Western Europe linked to Covid-19, in proportion to its population. However, Mr Johnson’s vaccine approach was largely successful, allowing the Tories to consolidate their lead over Labor in terms of approval ratings. As the UK gradually deconfines, much of Western Europe is hit by a third pandemic wave.

The political consequences are already being felt. In Germany, the management of the pandemic is increasingly criticized. In October, the country will hand over to a new head of state after 16 years of reign by Angela Merkel. Contamination has increased there and the country’s federal decision-making model has come under pressure, with the threat that the central government of Berlin will take responsibility for coordinating regional immunization programs.

In a year from now, French voters will choose their next president. The chances of Emmanuel Macron being re-elected for a second five-year term will depend above all on the judgment made by voters on his management of the pandemic. Marine Le Pen, leader of the far-right National Rally party, intends to capitalize on popular discontent similar to that which brought Donald Trump to power in 2016 and encouraged British voters to vote for Brexit.

Growth projections

A little over a year after the start of the pandemic in Europe, four vaccines developed by AstraZeneca plc, Pfizer-BioNTech, Moderna Inc. and Johnson & Johnson, are available. After a series of nationwide suspensions in March, Union regulators eventually approved AstraZeneca’s vaccine. Some regulators have limited it to the older groups, following problems with blood clotting in younger populations. Of the 360 ​​million doses promised in the second quarter, 200 million are expected to come from Pfizer.

The delays in their deployment had a direct economic impact, as the third wave imposes more restrictions, including a new national containment in France. Nevertheless, thanks to monetary and fiscal support, economies have shown remarkable resilience. In France, growth is expected to accelerate in the second half of 2021, with an increase of 5.5% over the year as a whole, according to the Banque de France. In Germany, the Bundesbank forecasts economic expansion of 3% for 2021, while Banca d’Italia expects growth less than 4% . Data for March showed that euro area service sector activity, although still in contractionary territory, was improving.

At this rate, we believe the EU will return to pre-pandemic production levels in early 2022. We expect the region’s gross domestic product to accelerate by 4.3% again this year.

In comparison, the United States could return to its pre-pandemic production in mid-2021 with a growth of 6% over the whole year, while China is expected to post 9% GDP growth this year. In the United Kingdom, where the initial impact of the pandemic was greater and where GDP fell by 9.8% over the year, the hoped-for rebound will also be more robust.

Last week, the International Monetary Fund raised its forecast for global economic growth for the second time since the start of the year. The global economy could grow 6% in 2021 and an additional 4.4% in 2022, compared to a 3.3% contraction in 2019, the Washington-based fund said. These increases come mainly from infrastructure spending and related to Covid-19, announced by the EU and in particular by the United States.

Spending plans

Last July, EU leaders adopted a pandemic fund of EUR 750 billion. For the first time, the agreement allows the European Commission, the Union’s executive body, to endorse debt on behalf of the 27 member states, potentially reducing the cost of borrowing for the poorest nations in the Union. The envelope, which is equivalent to 5.6% of the EU’s GDP, however, faces political dissensions as to its distribution. Member states have until the end of April to submit their initial spending proposals to the European Commission.

The whole question is whether these funds can be distributed at a rate fast enough to support the economies impacted by the pandemic. The bulk of the aid will be disbursed in 2023 and 2024, in line with the EU’s seven-year budgetary spending plans.

The United States has pledged USD 1.9 trillion to combat the effects of the pandemic, in addition to spending plans for infrastructure and employment worth USD 2.2 trillion , while the Federal Reserve has pledged to leave its key rates unchanged until 2023.

The EU is preparing to accelerate its vaccination campaign against Covid-19. European companies, whose activities are strongly export-oriented, are therefore in a good position to benefit from the global economic upturn.e. European industry, materials and certain financial and energy companiess, in particular, offer opportunities for investors to rotate from growth stocks to cyclical and value stocks.