Eurozone economy faces risk of new wave of virus, ECB policymakers say | The powerful 790 KFGO

S’AGARO, Spain (Reuters) – The eurozone economy is still rebounding, but it faces a new challenge linked to an increase in coronavirus cases and a new variant, two central bank policymakers said on Friday European.

Global authorities and investors reacted with concern on Friday to a new variant of the coronavirus detected in South Africa, with the European Union and Britain among those stepping up border controls as researchers investigated whether the mutation was resistant to the vaccine.

ECB policymakers Ignazio Visco and Luis de Guindos have said the pandemic is again a cause for concern.

“Uncertainty remains high, mainly reflecting a health situation which has once again become a source of considerable concern,” Visco, the governor of the Bank of Italy, said at an event.

Stock markets were down sharply and investors pushed back their bets on the rate hike on Friday, fearing the new variant could evade immune responses and be more heritable. [MKTS/GLOB]

The ECB has not commented on a rate hike next year, but it is generally expected to cut its Pandemic Emergency Purchase Program (PEPP) by 1.85 trillion euros ($ 2.1 trillion) in March.

Visco said the further rise in the number of infections in Europe and other countries, which has accelerated in recent weeks, has pushed back “the post-COVID perspective.”

De Guindos, the ECB’s vice-president, also noted the challenges of the new variant, the increase in cases as well as supply bottlenecks, but adopted a more optimistic tone.

“We have a differentiator, which is vaccination,†de Guindos said at an event in Spain. “So I think the effect on the economy is going to be more limited, I’m relatively optimistic.”

He added that the economy had shown an ability to adapt to the pandemic and predicted that the economy would grow by around 5% this year and sharply next year as well.

($ 1 = 0.8862 euros)

(Reporting by Belen Carreno in S’Agaro, Giuseppe Fonte and Giulia Segreti in Rome; written by Francesco Canepa in Frankfurt and Jesus Aguado in Madrid; edited by Alison Williams and Emelia Sithole-Matarise)