Ursula von der Leyen – AstraZeneca is a scapegoat for the European Commission’s staggering institutional failure
The EU’s vaccination debacle has delayed Europe’s social reopening and economic recovery by three months, with all the consequences that this will have for sovereign debt ratios, small firm solvency, and labour hysteresis.
It is one reason – though not the only one – why the International Monetary Fund thinks the region will be left behind as the US and China roar back this year. It is a Sino-American G2 world from now on. The pandemic has brought forward Europe’s definitive relegation from the top league.
The IMF and other global bodies lump the UK with the worst of Europe in their grim forecasts. The Fund thinks growth will be just 4.5pc this year after a 10pc contraction in 2020. The OECD says the UK will be the laggard of the developed world, far behind even France and Italy.
If that happens, I will eat my hat (another one). Britain’s vaccination success so far – and a steeper relative trajectory over coming weeks – imply a rebound roughly ten weeks sooner. So long as Rishi Sunak restrains the Treasury from fiscal tightening too soon, it may well be a V-shaped take-off.
The Office for National Statistics will publish a paper next week showing that the UK’s (best practice) method of measuring health and education in GDP figures exaggerated the fall in GDP last year. We cut ‘output’ when doctors see fewer patients, or schools have fewer classes. Other countries measure differently.
This flattered German GDP by roughly 2pc last year, or French and Italian GDP by around 1pc. The opposite effect will kick as life returns to normal. It is the UK recovery that will be flattered.
My bet: the UK will be the star of the big European economies this year and may clock up 6pc growth as pent-up investment flows, assuming the IMF is broadly right on world growth. The Brexit trade shock will be less than feared.
The UK’s flexible labour markets will make the switch to the post-Pandemic digital economy better than Germany, France, or Italy. Sterling will be the foreign exchange darling. The FTSE-250 will be the catch up story of 2021.
The global narrative on Brexit will become less relentlessly hostile. It will be the mirror image of Europe’s eroding credibility. Who knows, perhaps even the Scots will feel that they have judged our imperfect but interwoven union a little too harshly.