Resurging coronavirus biggest threat to euro zone economy

The resurgence in coronavirus cases is the biggest threat to the recovering eurozone economy, according to a Reuters poll of economists, who say growth and inflation are more likely to create negative surprises over the coming year than positive ones.

Key notes

• Reuters poll-further surge in coronavirus cases is the biggest risk to eurozone economy over the coming year, say 90% of economists.
• Reuters poll-euro zone gdp to grow 8.1% in q3 and 2.5% in q4 (vs 8.1%; 3.0% in Aug poll).
• Reuters poll-euro zone gdp to average -8.1% and +5.5% in 2020 and 2021 (vs -8.2%; +5.5% in Aug poll).

Market implications

While a strong euro zone rebound is underway as lockdown restrictions have been eased and businesses reopened, France and Spain among others in the 19-member bloc are grappling with a virus resurgence.

The risk here is political.

The current pact between nations in the rescue package is vulnerable on a surge of new cases and subsequent shuttering of businesses and economic strife. 

The euro has been bid on the basis that there has been a cohesion between the nations, but that could all come undone again at the blink of an eye.