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Covid vaccine rollout fuels hopes of record eurozone growth in 2021

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The eurozone economy will grow next year at its fastest rate since the single currency was launched more than two decades ago, according to a Financial Times poll of economists who said the biggest risk was if vaccines failed to stop the coronavirus pandemic.

As European countries start to vaccinate people against Covid-19, the 33 economists polled by the FT this month predicted that eurozone gross domestic product would rise by an average of 4.3 per cent next year, rebounding from this year’s record post-war recession.

This is more optimistic than the European Central Bank’s 3.9 per cent forecast published this month, but below the 5.2 per cent that the IMF predicted in October.

“Vaccines will re-establish normal conditions for most services,” said Daniel Gros, a director at the Centre for European Policy Studies. “There are no fundamental financial imbalances to hold back either demand or investment. Consumers will have liquidity to satisfy pent-up demand.”

However, most economists expect the pandemic to leave significant scars, with more than half predicting unemployment in the 19-country bloc will rise above 10 per cent for the first time in more than four years, up from 8.4 per cent in October.

Column chart of Eurozone GDP growth (%) showing Economists expect historic rebound

“While we forecast above-potential growth in the coming years, we expect second-round effects on the labour market and credit flows to weigh on the recovery for a significant period of time,” said Anatoli Annenkov, economist at Société Générale.

Two-thirds of economists polled think eurozone GDP will not recover to pre-pandemic levels until the middle of 2022 at the earliest, with a handful — including Mr Annenkov — saying this will happen only in 2023. Their forecasts for eurozone growth next year range from only 1.5 per cent to 6 per cent.

Lockdowns and travel restrictions to contain the virus’s spread are expected to drag the eurozone into a double-dip recession this winter. 

How did last year’s predictions fare?

Covid-19 has made a mockery of economists’ forecasts for 2020.

On average, economists predicted to the FT that eurozone growth would dip below 1 per cent this year — the slowest rate for seven years. That sounded bad at the time, but it was nowhere near as grim as the 7.3 per cent contraction the ECB now estimates.

Unsurprisingly, economists did not foresee the ECB launching fresh stimulus measures or Germany’s move away from its longstanding support for balanced budgets — both triggered by the economic impact of the pandemic.

Those surveyed did correctly predict that headline inflation would fall this year, but none imagined it could drop to the 0.2 per cent the ECB now expects.

However, most economists expect that by the second half of next year widespread vaccination and a boost from the €750bn EU recovery fund will prompt a “Roaring Twenties”-style rebound — similar to the one that followed the Spanish flu pandemic a century ago.

“We will see a surprise story of economic growth,” said Nick Bosanquet, professor of health policy at Imperial College London, predicting “a strong rise in consumption”.

While many economists think eurozone banks will suffer a rise in non-performing loans next year, most do not expect a repeat of the banking crisis that swept across the bloc after the 2008 financial crisis. 

Lucrezia Reichlin, economics professor at the London Business School, said the biggest risk for the economy was if the EU’s recovery fund “failed to deliver growth in fragile countries with consequences on public debt dynamics, in particular in Italy”.

Eurozone inflation has turned negative in recent months, but one-off factors are partly to blame and economists on average predicted headline price growth would rise to near 1 per cent next year, although still well below the ECB’s target of just under 2 per cent.



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Global house prices: Raising the roof

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Global house prices: Raising the roof



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Missing Belarus activist found hanged in Kyiv park

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Belarus updates

A Belarusian opposition activist has been found hanged from a tree in a park near his home in Ukraine, a day after he was reported missing. Local police said his death could have been made to look like suicide.

Vitaly Shishov, who led the Kyiv-based organisation Belarusian House, which helps Belarusians fleeing persecution find their feet in Ukraine, had been reported missing by his partner on Monday after not returning from a run.

Shishov’s death follows weeks of increased pressure in Belarus by authorities against civil society activists and independent media as part of what the country’s authoritarian president Alexander Lukashenko has called a “mopping-up operation” of “bandits and foreign agents”.

Many Belarusians have fled the country since Lukashenko launched a brutal crackdown last summer after nationwide protests erupted following his disputed victory in presidential elections. About 35,000 people have been arrested in Belarus and more than 150,000 are thought to have crossed into neighbouring Ukraine.

Franak Viacorka, an aide to Belarusian opposition leader Sviatlana Tsikhanouskaya who met UK prime minister Boris Johnson on Tuesday in London, said Shishov’s death was “absolutely shocking and unexpected to all of us”.

“He [Shishov] and his friends helped people who were moving to Ukraine,” Viacorka told the Financial Times. “They were very helpful, especially for those who have just arrived and didn’t know what to do.”

Viacorka said many activists living in Ukraine, such as Shishov who fled Belarus in 2020, had “complained about possibly being followed, and receiving threats”.

Kyiv park where Vitaly Shyshov’s body was found
The Kyiv park where Vitaly Shishov’s body was found after he failed to return home following a run © Gleb Garanich/Reuters

Downing Street said that after meeting Tsikhanouskaya, Johnson condemned the Lukashenko regime’s severe human rights violations. “The UK stands in solidarity of the people of Belarus and will continue to take action to support them,” a spokesperson said.

Ukrainian police have now launched a criminal case for the suspected murder of Shishov, including the possibility of “murder disguised as suicide”.

Yuriy Shchutsko, an acquaintance and fellow Belarus refugee who found Shishov’s body, ruled out suicide, pointing out that Shishov’s nose was broken.

“I suspect this was the action of the [Belarus] KGB . . . we knew they were hunting for us,” he told Ukrainian television.

Ihor Klymenko, head of the National Police of Ukraine, subsequently said Shishov’s body had what appeared to be “torn tissue” on his nose and other wounds, but stressed it would be up to medical examiners to determine if these were caused by beatings or the result of suicide.

There was no immediate comment from Lukashenko or his administration.

Belarusian House said: “There is no doubt that this is an operation planned by the Chekists [the Belarusian KGB] to eliminate someone truly dangerous for the regime.

“Vitalik was under surveillance,” it added. “We were repeatedly warned by both local sources and our people in the Republic of Belarus about all kinds of provocations up to kidnapping and liquidation.”

Adding to the swirl of attention on Belarus this week, Tokyo Olympics sprinter Krystsina Tsimanouskaya on Monday took refuge in Poland’s embassy after alleging she had been taken to the airport against her will, having criticised her Belarusian coaches.

The athlete has said she feared punishment if she went back to Belarus but has so far declined to link her problems to the country’s divisions.

Shishov’s death comes five years after Pavel Sheremet, a prominent Belarus-born opposition figure and journalist, was killed in an improvised bomb explosion in downtown Kyiv while driving to work at a local radio station. Lukashenko has ruled Belarus since 1994.

Ukrainian authorities at first suggested Belarusian or Russian security services could have been involved in the hit, as Sheremet was close to opposition movements in Russia as well.

Instead, officials charged three Ukrainian volunteers who supported war efforts against Russia-backed separatists in eastern Ukraine — although they steadfastly denied involvement and authorities were unable to provide a motive in what has been widely described as a flimsy case.

Additional reporting by Jasmine Cameron-Chileshe in London



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EU pledges aid to Lithuania to combat illegal migration from Belarus

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EU immigration updates

In the latest sign of deteriorating relations between the EU and Belarus, Brussels has promised extra financial aid and increased diplomatic heft to help Lithuania tackle a migrant crisis that it blames on neighbouring Belarus and its dictator Alexander Lukashenko.

Lithuania detained 287 illegal migrants on Sunday, more than it did in the entirety of 2018, 2019, and 2020 combined, the vast majority of them Iraqis who had flown to Belarus’s capital Minsk before heading north to cross into the EU state. Almost 4,000 migrants have been detained this year, compared with 81 for the whole of 2020. 

“What we are facing is an aggressive act from the Lukashenko regime designed to provoke,” Ylva Johansson, the EU commissioner for home affairs told reporters on Monday after talks with Lithuania’s prime minister Ingrida Simonyte. “The situation is getting worse and deteriorating . . . There is no free access to EU territory.”

The EU imposed sweeping sanctions against Lukashenko’s regime in June, after he fraudulently claimed victory in last year’s presidential election and then led a brutal campaign to violently suppress protesters and jail political opponents. Lukashenko has ruled Belarus since 1994.

The rising concern over the migrant crossings, which EU officials say is a campaign co-ordinated by Lukashenko’s administration, comes as one of the country’s athletes competing in the Tokyo Olympic Games sought refuge in Poland after team management attempted to fly her home against her will after she publicly criticised their actions.

Johansson said the EU would provide €10m-€12m of immediate emergency funding and would send a team of officials to the country to assess the requirements for longer-term financial assistance, including for extra border security and facilities to process those attempting to enter.

Simonyte said that Vilnuis would require “tens of millions of euros” by the end of the year if the number of people attempting to cross the border continued at the current pace.

Lithuania’s foreign minister Gabrielius Landsbergis told the Financial Times in June that Belarus was “weaponising” illegal immigration to put pressure on the Baltic country over its housing of several opposition leaders. Since then, the flow of illegal immigrants from Iraq, Syria, and several African countries has increased sharply.

Iraqi diplomats visited Vilnius at the end of last week after Lithuania’s foreign minister flew to Baghdad in mid-July. Johannson said on Monday that EU diplomats were engaged in “intensive contacts” with Iraqi officials, which she said were “more constructive than we had hoped”.

State carrier Iraqi Airways offers flights from four Iraqi airports to Minsk, according to its website. Former Estonian president Toomas Ilves suggested on Twitter that the EU could cut its aid to Iraq “immediately until they stop these flights”.

Speaking at the border with Belarus on Monday, Johansson added that the tents provided by Lithuania were unsuitable for families. Lithuania’s interior minister Agne Bilotaite said she hoped the number of illegal migrants would subside in the coming months but that Vilnius was planning to build some housing to accommodate them over the upcoming winter.



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