Second wave hitting growth prospects

The reimposition of coronavirus restrictions has caused the recovery to stall – if not go into reverse in many countries – with France and Spain most affected. There are tentative signs that the number of new cases is beginning to slow again in Spain, but it will be a long time before governments risk lifting their restrictions. The second wave has already prompted people to scale back travel to recreational and retail centres and is likely be a drag on the economy until well into next year. As a result, fiscal support for the economy will need to be sustained and the ECB will have little choice but to extend its emergency asset purchases (the PEPP) beyond the middle of next year.