Vaccines and Biden, the binomial of “strong profits” for Europe in 2021

As the second wave of the pandemic gradually recedes in most of Europe, experts and analysts are optimistic about growth in 2021. Mind you, green shoots will arrive after a “mediocre” winter, say Berenberg experts. The confinements and restrictions will continue to be the trend after Christmas, while the old continent awaits the ‘third wave’, but several factors show that there is light at the end of the tunnel.

Despite serious short-term risks, the overall balance of risks for 2021 leans higher courtesy of US President-elect Joe Biden, the vaccine hopes and some progress on European tax issues, explain the experts of the German entity. “Once the second wave of the pandemic has run its course, the growth prospects are likely to be unusually positive for the European continent in 2021 and 2022,” they say.

Restrictions, soft closures, and behavior changes seem to be working. Germany is likely to extend its comparatively mild November restrictions for about three weeks in December. Some other major countries with more severe closures, including non-essential store closures, notably France and Poland, appear set to announce a partial easing of restrictions in the coming days, while the UK will move from a 2.0 nationwide closure to a regional tiered approach. “We can still look forward to a slightly brighter Christmas,” they say from Berenberg.

However, many experts warn that, after the Christmas holidays, the following two months, until March, the hit of a third wave of the pandemic could be seen if the citizenship does not maintain certain restrictions. It will also be then when the effect of the first vaccination campaigns will be felt, once the doses of the companies’ candidates are distributed Pfizer-BioNtech, Moderna and AstraZeneca, which are already initiating procedures with the regulatory authorities for its distribution. Therefore, closures and lockdowns could continue to be the trend in the first quarter of 2021.

However, the experts of the German entity predict that the good news of the candidates, plus the unlocking of the pandemic recovery fund in the EU, will fuel consumer confidence, which has returned to a minimum in November. The controversy generated by the veto of Hungary and Poland to the budgets of 1.8 billion euros, could last until the beginning of 2021. “But like the others 25 EU members are in a stronger negotiating position, it is unlikely that both countries will delay the payments of the EU tax mega-agreement for long, “the German entity said.

BIDEN AND THE BREXIT

In addition to the above, the rebound in global economic activity after the virus should benefit the European Union (EU), the world’s leading exporter, more than many other regions. Furthermore, “a calmer and cooperative trade policy of the United States under the direction of Biden will make a big difference for Europe“Explain the experts of the German entity. This period of rapprochement will come after in 2019 the uncertainty caused by Trump’s trade war against China and his threats against the EU reduced the growth of the eurozone by approximately one percentage point.

On a smaller scale, the looming end of Brexit uncertainty “will unlock some investment in 2021 as companies will finally know how to restructure their pan-European supply chains, one way or another,” Berenberg analysts round out.

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