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13 October 2021
Europe COVID-19 tracker Free to View
Economics - Europe
Turning points?
With COVID-19 remaining under control, the surge in energy
Fabio Balboni
prices continues to dominate the headlines… Senior Economist
HSBC Bank plc
…with markets now pricing in the first ECB rate rise by 2022
Meanwhile, supply constraints are starting to have a bearing on
the recovery, and countries are looking at ways to tackle them
Preparing for the winter
The COVID-19 situation remains under control across the continent, but there are signs of
a renewed deterioration in the UK. Countries are focussing on limiting the risks heading
into the winter months and reinvigorating the vaccination campaigns which are slowing
(charts 1-9). The Italian government confirmed that from 15 October, a COVID-19 ‘green-
passport’ will be required for all public and private sector jobs. Per the press, with 2.5m
unvaccinated workers, this could pose huge challenges and require up to 15m tests per
week (Il Sole 24 Ore, 12 October). In Germany, booster shots of mRNA vaccines have
now been officially recommended for all people above the age of 70 and at higher risk.
Energy concerns continue to dominate
Surging energy prices continue to dominate the headlines across Europe. In an extreme
scenario, we estimate this could push inflation towards 5% y-o-y in Q4. The actual peak
might be lower, as many countries announced interventions to cap price rises for the
consumers. On 13 October, the European Commission (EC) unveiled a ‘toolkit’ of extra
measures which countries can use, ranging from tax cuts, support to hard-hit industries
without violating the EU’s state aid rules, and diverting revenue from the EU Emission
Trading Scheme to help poorer households. Nuclear power is also on the agenda, with
French president Emmanuel Macron expected to give the go-ahead for a cluster of nuclear
reactors (FT, 12 October) and pushing, alongside the Czech Republic and Finland, for the
EC to designate nuclear power as a “green” technology under the upcoming taxonomy.
As inflation rises, markets are also warming up to the idea of a hawkish turn by the ECB
(charts 28-33). The first rate hike is now fully priced in by the end of 2022. ECB Chief
Economist Philip Lane, though, re-stated that the energy shock should not “have much of
footprint on the medium-term inflation outlook” (Reuters, 11 October).
Supply constraints biting, budget season continues
Supply chain disruptions are holding back the manufacturing sector, with output dropping
1.6% m-o-m in August in the eurozone, led by a huge 17.2% m-om fall in car production
(charts 16-21). Labour shortages are also becoming more widespread (charts 22-27).
Meanwhile, the 2022 budget announcements continue to trickle in. Spain confirmed the
tendency seen in France and Italy, maintaining an expansionary fiscal policy stance. On 12
October, Mr Macron announced a new EUR30bn plan to support high-tech industries and
reduce dependence on imports, comprising EUR3-4bn of extra spending already in 2022.
Tables 49-54 have been updated to reflect the latest fiscal announcements for 2022.
This is an abridged version of a report by the same title published on 13-Oct-21. Please
contact your HSBC representative or email AskResearch@hsbc.com for more information.
Disclosures & Disclaimer Issuer of report: HSBC Bank plc
This report must be read with the disclosures and the analyst certifications in
View HSBC Global Research at:
the Disclosure appendix, and with the Disclaimer, which forms part of it. https://www.research.hsbc.comFree to View ● Economics - Europe
13 October 2021
Signs of deterioration in the UK COVID-19 situation
1. New cases in the eurozone Big 4 stay low but they are back on the rise in the UK
000s COVID-19 cases* in the eurozone 'big 4' and UK 000s
160 160
Thousands
Thousands
140 140
120 120
100 100
80 80
60 60
40 40
20 20
0 0
Feb-20 Apr-20 Jun-20 Aug-20 Oct-20 Dec-20 Feb-21 Apr-21 Jun-21 Aug-21 Oct-21
Germany France Italy Spain UK
Source: Refinitiv Datastream, HSBC. Note: *7-day moving average.
2. The UK, Ireland, the Netherlands and to a lesser extent Greece saw more cases last week
7dma Daily COVID-19 cases per 100k of population 7dma
60 60
50 50
40 40
30 30
20 20
10 10
0 0
Spain
Germany
Portugal
Sweden
Italy
Ireland
Greece
Netherlands
Belgium
Norway
UK
France
Switzerland
7-days to 5-Oct 7-days to 12-Oct
Source: Refinitiv Datastream, HSBC. Note: Weekend numbers are reported as 0 so “7-days to” does not include Saturday and Sunday.
3. ICU numbers continue to ease although 4. …and new deaths remain low compared
hospital admissions are rising in the UK… with previous waves
Total COVID-19 related ICU patients (7 dma) Total No. COVID-19 related deaths (7 dma) No.
8000 8000 1400 1400
1200 1200
6000 6000
1000 1000
800 800
4000 4000
600 600
2000 2000 400 400
200 200
0 0 0 0
Mar-20 Jul-20 Nov-20 Mar-21 Jul-21 Feb-20 Jul-20 Dec-20 May-21 Oct-21
Germany France Italy Germany France Italy
Spain UK* UK Spain
Source: Macrobond, HSBC. Note: *medically ventilated. Source: Our World in Data, HSBC.
We acknowledge the assistance of Yash Dewan, HSBC Bank plc, in the preparation of this report.
2Free to View ● Economics - Europe
13 October 2021
Increasing vaccine coverage remains the priority
5. Vaccine coverage is high in most western European countries…
Number Number of v accine doses administered per 100 people Number
180 180
150 150
120 120
90 90
60 60
30 30
0 0
Spain (10 Oct)
Poland (4 Oct)
Malta (10 Oct)
Sweden (8 Oct)
Denmark (10 Oct)
Portugal (4 Oct)
Norway (10 Oct)
Greece (11 Oct)
Finland (10 Oct)
Romania (10 Oct)
Germany (11 Oct)
UK (10 Oct)
Ireland (5 Oct)
Bulgaria (11 Oct)
Italy (11 Oct)
US (9 Oct)
France (10 Oct)
Source: Our World in Data, HSBC.
6. … but countries are struggling to avert the 7. Germany has now provided just over a
downward trend in vaccination rates million booster shots
No. Daily COVID-19 v accine doses No. 000s Germany : Vaccination by type (weekly avg.) 000s
14000 14000 600 600
Thousands
12000 12000 500 500
10000 10000
400 400
8000 8000
6000 6000 300 300
4000 4000 200 200
2000 2000 100 100
0 0
Dec-20 Mar-21 Jun-21 Sep-21 0 0
Germany France Italy Dec-20 Feb-21 Apr-21 May-21 Jul-21 Aug-21
Spain UK US First dose Second dose Booster
Source: Our World in Data, HSBC. Source: Macrobond, HSBC.
8. The number of cases among children 9. …but remains relatively contained in other
and young continues to rise in the UK… countries such as France
000s England: New COVID cases by age (7 dma) 000s 000s France: New COVID-19 cases by age (7 dma) 000s
25 25 16 16
Thousands
Thousands
14 14
20 20
12 12
15 15 10 10
8 8
10 10 6 6
4 4
5 5
2 2
0 0 0 0
Mar-20 Jul-20 Nov-20 Mar-21 Jul-21 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21
0-4 5-14 15-34 0-9 10-19 20-39
35-59 60-79 80< 49-59 60-79 80<
Source: UK government, HSBC Source: France government, HSBC
3Free to View ● Economics - Europe
13 October 2021
The peak of the re-opening process is now behind us
10. UK retail mobility continues to soften 11. …and a similar trajectory is seen in the
after the end of the summer… eurozone with limited restrictions back
Index UK: Stringency of restrictions Dev iation Index Eurozone: Stringency of restrictions Dev iation
and retail mobility from baseline and retail mobility from baseline
0 20 0 20
20 0 20 0
40 -20 40 -20
60 -40
60 -40
80 -60
80 -60
100 -80
100 -80 Feb-20 Jun-20 Oct-20 Feb-21 Jun-21 Oct-21
Feb-20 Jun-20 Oct-20 Feb-21 Jun-21 Oct-21 Stringency score (LHS, inverted) Mobility (RHS)
Stringency score (LHS, inverted) Mobility (RHS)
Source: Google mobility, Oxford COVID-19 Government response Tracker, HSBC. Source: Google mobility, Oxford COVID-19 Government response Tracker, HSBC
12. Retail mobility is now close to pre-pandemic levels in most European countries although
on a slight downward trajectory…
% from baseline Europe and US: Mobility data - retail and recreation* % from baseline
20 20
0 0
-20 -20
-40 -40
-60 -60
-80 -80
-100 -100
Mar-20 May-20 Jul-20 Sep-20 Nov-20 Jan-21 Mar-21 May-21 Jul-21 Sep-21 Nov-21
Germany France Italy Spain
UK Sweden Norway US
Source: Google, HSBC. Note: *7-day moving average.
13. …while workplace mobility is on a slight upward trajectory but remains below pre-crisis
levels as more people are choosing to work remotely
% from baseline Europe and US: Mobility data - w orkplaces* % from baseline
20 20
0 0
-20 -20
-40 -40
-60 -60
-80 -80
Mar-20 May-20 Jul-20 Sep-20 Nov-20 Jan-21 Mar-21 May-21 Jul-21 Sep-21 Nov-21
Germany France Italy Spain
UK Sweden Norway US
Source: Google, HSBC. Note: *7-day moving average.
4Free to View ● Economics - Europe
13 October 2021
All quiet on the restrictions front
14. Latest on the restrictions from the major European countries
Country Latest lockdown measures
Germany German nationwide COVID-19 policies are currently based on the Infection Protection Act amended on 23 August
which states that restrictions and regulations are subject to first, the new infection numbers, second, the ICU capacity
usage as well as the increase in ICU numbers and third, the vaccination progress.
In general, the current regulation still strictly limits the general accesses to public and private indoor events like
restaurants, (sporting) events, personal services, general accommodation and visiting public institutions (in particular
care homes and hospitals). People are exempt from this restriction as long as they can provide either a negative test
result on COVID-19 or are either fully vaccinated or have recovered from COVID-19.
However, German federal states can relax this so called 3G-rule so that in practice only very few restrictions remain.
These include the general obligation to wear masks indoors as well as e.g. on public transport. Additionally, some
federal states have even further relaxed rules for businesses and accommodation services if they limit access to only
fully vaccinated and recovered people (2G-rule), In this case they are allowed to lift e.g. the mask wearing obligation or
increase the allowed customer capacity.
France Currently, only some overseas territories are under local lockdowns or curfews. In metropolitan France, current
restrictions are focused on unvaccinated people (aged above 12) via the imposition of a COVID-19 health pass (i.e. a
proof of vaccination or a negative test) called ‘passe sanitaire’ to access some activities (museums, cinemas, bars,
restaurants, large shopping malls, hospitals and some long-distance transports like airplanes and trains). COVID-19
tests will no longer be free of charge for unvaccinated adults from 15 October. In addition, vaccination is mandatory for
some key occupations (healthcare, firemen) and breaches can lead to penalties like suspension without pay.
Primary, secondary and high schools re-opened on 2 September with 100% of physical attendance but will maintain
strict protocols (frequent testing, mask wearing, limitation of interactions) for the departments where incidence rate is
high. In primary schools, the detection of one COVID-19 case in a classroom will lead to its closure for 7 days (with
lessons being held on distance). For secondary and high schools, in the same situation, vaccinated pupils will be
authorised to continue to attend lessons physically.
Spain On 9 May, the state of emergency expired and was not extended by the government. With that, the nationwide curfew
also came to an end, even though it remains in place in some cities in Andalusia (2-7am), Catalonia, Valencia
Community, and Navarra (1-6am) while some regions still impose limited restrictions to nightlife. The freedom to travel
across regions has been re-established, with no regions maintaining the external border closure in place.
From 6 June, Masks are no longer necessary in outdoor settings where social distancing is observed. Most regions still
impose limitations in terms of the maximum number of people allowed for gatherings. Some regions have introduced a
‘green pass’ requirement for entering cultural and sports events, and some are considering also for restaurants and bars.
Spain’s external frontier remains open. For entry, a proof of vaccination or a negative COVID-19 test is required.
Italy Currently, all the Italian territory is in the ‘white’ category with hardly any restrictions (other than obligatory mask
wearing indoors – since 28 June, masks are no longer required outdoors – and some social distancing requirements).
The government has introduced a ‘green pass’ requirement (full vaccination or negative COVID-19 test) to go into
restaurants and bars (indoors), theatres, cinemas public transport, as well as some outdoors venues, and attend
concerts and sporting events. The government has recently announced that from 15 October until the end of the year
the ‘green pass’ will be required for all public and private sector workers, with high penalties for the non-compliant.
As for international travel, people arriving from the EU no longer have to quarantine, but they will be required to show
a negative COVID-19 test undertaken within 48 hours before departure (unless fully vaccinated). For the UK, the
government introduced a special 5-day quarantine requirement (fully vaccinated people, though, are exempt).
UK Having been in lockdown through the first quarter of the year, the UK economy has now largely re-opened.
In September, the English government said it would not be going ahead with plans for a ‘vaccine passport’ to enter
nightclubs, meaning there are essentially no restrictions on social contact or economic activity, though it warned that it
might have to reintroduce mask wearing and the recommendation to work from home, if the COVID-19 situation
worsened. For Scotland, Wales and Northern Ireland, mask wearing remains mandatory, and the former two have
‘vaccine passport’ systems in place for nightclubs and some other venues.
New travel rules were announced on 17 September, which divides arrivals into two groups – ‘red list’ and the rest of
the world. Under the new system, entry into the UK from the red list remains banned to non-UK or Irish nationals. As
of 15 February, for those who cannot be refused entry from these countries – i.e. returning British or Irish nationals –
a mandatory 10-day quarantine in government-approved accommodation applies. But the number of countries on the
list was slashed in October, from over 50 to just seven.
For those arriving into England and Scotland from the rest of the world, no pre-departure tests are required, and only
a lateral flow test, rather than a PCR, will be required, on day 2 after arrival. Wales and Northern Ireland are
considering whether to drop the PCR requirement.
Source: Country data, HSBC
5Free to View ● Economics - Europe
13 October 2021
Rising inflationary pressures due to surging energy prices
16. Eurozone industrial production fell 17. The main culprit was faltering car
sharply in August with Germany faring worst production due to supply constraints
Index (100 = Eurozone: Industrial production Index (100 = Index Eurozone: Industrial production Index
Jan 20) Jan 20) (Jan 20 = 100) (Jan 20 = 100)
110 110 120 120
100 100 100 100
90 90 80 80
80 80 60 60
70 70 40 40
20 20
60 60
0 0
50 50 2019 2020 2021
Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Jul-21 Industrial production IP ex. motor vehicles
Eurozone Germany France
IP motor vehicles
Italy Spain
Source: Refinitiv Datastream, HSBC. Source: Refinitiv Datastream, HSBC.
18. The gap between orders and productions 19. The ZEW saw another sharp drop in
in Germany remains high, even if new orders expectations while also current conditions
are now also plunged 7.7% in August now appear to be past the peak
Index Germany : Orders and production Index Index Germany : ZEW survey Index
(Jan 20 = 100) (Jan 20 = 100) 100 100
125 125 75 75
100 100 50 50
75 75 25 25
50 50 0 0
25 25 -25 -25
0 0 -50 -50
-25 -25 -75 -75
2010 2012 2014 2016 2018 2020 -100 -100
Gap 2010 2012 2014 2016 2018 2020
New manufacturing orders
IP (ex. energy and constr.) ZEW expectations ZEW current situation
Source: Macrobond, HSBC. Source: Macrobond, HSBC.
20. The ZEW survey saw sentiment falling 21. German trade data also show the
across all sector, and particularly in export sector has been losing momentum
mechanical engineering and car production
Index Germany : ZEW sector breakdown Index EURbn Germany : Trade balance % m-o-m
100 100
75 75 25 25
50 50 15 15
25 25
5 5
0 0
-25 -25 -5 -5
-50 -50 -15 -15
-75 -75
-100 -100 -25 -25
2015 2016 2017 2018 2019 2020 2021 2019 2020 2021
Mechanical eng. IT Trade balance (LHS) Exports (RHS)
Imports (RHS)
Construction Automobile
Source: Macrobond, HSBC Source: Refinitiv Datastream, HSBC
6Free to View ● Economics - Europe
13 October 2021
Labour shortages becoming more and more evident
22. Labour shortages are higher than before 23. After the re-opening, also the services
the crisis in manufacturing in the eurozone sector is starting to see labour shortages
Index EC manufacturing survey: Factors limiting Index Index EC serv ices survey: Factors limiting Index
production - labour business - labour
30 30 35 35
25 25 30 30
20 20 25 25
20 20
15 15
15 15
10 10
10 10
5 5 5 5
0 0 0 0
2010 2012 2014 2016 2018 2020 2010 2012 2014 2016 2018 2020
Eurozone Germany France Eurozone Germany France
Italy Spain Italy Spain
Source: European Commission. Source: European Commission.
24. In France, the share of firms facing 25. ...and in Italy labour shortages are now
hiring difficulties is increasing rapidly… more acute than before the crisis
% France: Share of firms facing difficulties of hiring % % Italy : Vacancy rate and obstacles to production %
90 90
4.0 4.0
75 75 3.5 3.5
3.0 3.0
60 60
2.5 2.5
45 45 2.0 2.0
30 30 1.5 1.5
1.0 1.0
15 15
0.5 0.5
0 0 0.0 0.0
2005 2008 2011 2014 2017 2020 Sep-18 Mar-19 Sep-19 Mar-20 Sep-20 Mar-21
Manufacturing Services Building Labour shortages Vacancy rate
Source: INSEE, HSBC. Source: ISTAT, Eurostat.
26. Italian firms see higher costs and longer 27. In the UK, the labour market remains hot
delivery times as major obstacles to their with increasing evidence of labour
ability to export shortages putting pressure on wages
% Italy : Main obstacles to ex ports % Index UK: REC/KPMG job surveys Index
25 25 90 90
20 20 70 70
15 15 50 50
10 10
30 30
5 5
10 10
0 0 2018 2019 2020 2021
2013 2014 2015 2016 2017 2018 2019 2020 2021 Overall staff availability
Permanent staff salaries
Higher costs/prices Longer delivery times Index of demand for staff
Source: ISTAT. Source: REC, KPMG.
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13 October 2021
Inflation concerns building
28. Wholesale gas and energy prices 29. …compounded by rising oil prices
continue to soar… which is now feeding through pump prices
EUR Netherlands: Energy prices EUR EUR/litre Eurozone: Petrol pump prices EUR/bbl
per MWh per MWh and Brent crude
210 350 1700 75
180 300
1600 65
150 250
1500 55
120 200
90 150 1400 45
60 100 1300 35
30 50 1200 25
0 0
1100 15
2010 2012 2014 2016 2018 2020
Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Jul-21
Gas prices - 1-month future (LHS) Pump prices (LHS) Oil price (RHS)
Electricity prices - 1-month future (RHS)
Source: Bloomberg, Refinitiv Datastream, HSBC. Source: Refinitiv Datastream, European Commission, HSBC.
30. We estimate this could push inflation 31. The market has now fully priced in the
towards 5% y-o-y in an extreme scenario first ECB rate increase by the end of 2022
% Yr ECB forecast: HICP inflation % Yr % EUR OIS forw ards %
5 5 0.3 0.3
0.2 0.2
4 4 0.1 0.1
3 3 0.0 0.0
-0.1 -0.1
2 2 -0.2 -0.2
1 1 -0.3 -0.3
-0.4 -0.4
0 0 -0.5 -0.5
2021 2022 2023 -0.6 -0.6
Sep 21 ECB f'cast HSBC (latest) 2021 2022 2023 2024 2025 2026
Full pass-through Full P-T (temp.) 13-Oct 10-Sep 30-Jul 14-May
Source: ECB, HSBC Source: Bloomberg.
32. The rise in the 5yr-5yr inflation swaps 33. ...and medium-term inflation
seems to have stalled though... expectations in the ZEW survey continued
to decline in October
% Eurozone: 5Yr 5Yr inflation sw aps % Index ZEW inflation ex pectations Index
2.0 2.0 100 100
75 75
50 50
1.5 1.5
25 25
0 0
1.0 1.0
-25 -25
-50 -50
0.5 0.5 2015 2016 2017 2018 2019 2020 2021
2016 2017 2018 2019 2020 2021 Eurozone Germany
Source: Bloomberg. Source: Macrobond, HSBC.
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13 October 2021
COVID-19 in Western Europe
34. New infection numbers have recently 35. The latest COVID-19 wave seems to
been steady in Germany have been well contained in France…
000s. Germany : COVID-19 cases 000s. 000s. France: COVID-19 cases 000s.
4500 35 7000 105
Thousands
Thousands
6000 90
3600 28
5000 75
2700 21 4000 60
1800 14 3000 45
2000 30
900 7
1000 15
0 0 0 0
Jan-20 Jun-20 Nov-20 Apr-21 Sep-21 Jan-20 Jun-20 Nov-20 Apr-21 Sep-21
New cases (RHS) Cumulative (LHS) New cases (RHS) Cumulative (LHS)
Source: Refinitiv Datastream, HSBC. Source: Refinitiv Datastream, HSBC.
36. …and in Italy, also thanks to a tough 37. Solid progress in Spain’s vaccination
application of the COVID-19 ‘green-pass’ programme seems to be paying off
000s. Italy : COVID-19 cases 000s. 000s. Spain: COVID-19 cases 000s.
5000 45 5200 100
Thousands
Thousands
4000 36
3900 75
3000 27
2600 50
2000 18
1300 25
1000 9
0 0 0 0
Jan-20 May-20 Sep-20 Jan-21 May-21 Sep-21 Jan-20 Jun-20 Nov-20 Apr-21 Sep-21
New cases (RHS) Cumulative (LHS) New cases (RHS) Cumulative (LHS)
Source: Refinitiv Datastream, HSBC. Source: Refinitiv Datastream, HSBC.
38. UK numbers are still high compared with 39. The fourth wave of COVID-19 seems to
the rest of Europe and now back on the rise have been contained in Switzerland
000s. UK: COVID-19 cases 000s. 000s. Sw itzerland: COVID-19 cases 000s.
9000 90 900 24
Thousands
Thousands
7500 75 750 20
6000 60 600 16
4500 45 450 12
3000 30 300 8
1500 15 150 4
0 0 0 0
Jan-20 May-20 Sep-20 Jan-21 May-21 Sep-21 Jan-20 May-20 Sep-20 Jan-21 May-21 Sep-21
New cases (RHS) Cumulative (LHS) New cases (RHS) Cumulative (LHS)
Source: Refinitiv Datastream, HSBC. Source: Refinitiv Datastream, HSBC.
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13 October 2021
40. Case numbers remain fairly elevated in 41. Norway seems to have brought the
Belgium and are rising in the Netherlands latest COVID-19 wave under control
000s. Netherlands/Belgium : COVID-19 cases 000s. 000s. Norw ay: COVID-19 cases 000s.
2400 28 200 5
Thousands
Thousands
1800 21 160 4
120 3
1200 14
80 2
600 7
40 1
0 0
Jan-20 May-20 Sep-20 Jan-21 May-21 Sep-21 0 0
Jan-20 May-20 Sep-20 Jan-21 May-21 Sep-21
NL - New cases (RHS) BE - New cases (RHS)
New cases (RHS) Cumulative (LHS)
NL - Cumulativ e (LHS) BE - Cumulative (LHS)
Source: Refinitiv Datastream, HSBC. Source: Refinitiv Datastream, HSBC.
42. Swedish case numbers remain low 43. In Ireland, there are some early sighs
despite re-openings and the colder weather of a possible new wave of infections
000s. Sw eden: COVID-19 cases 000s. 000s. Ireland: COVID-19 cases 000s.
1200 12 400 10
Thousands
Thousands
900 9 320 8
240 6
600 6
160 4
300 3
80 2
0 0 0 0
Jan-20 May-20 Sep-20 Jan-21 May-21 Sep-21 Jan-20 May-20 Sep-20 Jan-21 May-21 Sep-21
New cases (RHS) Cumulative (LHS) New cases (RHS) Cumulative (LHS)
Source: Refinitiv Datastream, HSBC. Source: Refinitiv Datastream, HSBC.
44. In Portugal, the Delta wave seems to 45. …but less so in Greece, where
have been contained… infections rates remain relatively high
000s. Portugal: COVID-19 cases 000s. 000s. Greece: COVID-19 cases 000s.
1200 18 720 6
Thousands
Thousands
15 600 5
900
12 480 4
600 9 360 3
6 240 2
300
3 120 1
0 0 0 0
Jan-20 May-20 Sep-20 Jan-21 May-21 Sep-21 Jan-20 May-20 Sep-20 Jan-21 May-21 Sep-21
New cases (RHS) Cumulative (LHS) New cases (RHS) Cumulative (LHS)
Source: Refinitiv Datastream, HSBC. Source: Refinitiv Datastream, HSBC.
10Free to View ● Economics - Europe
13 October 2021
Fiscal measures (in the Big 4 eurozone countries and the UK)
46. Fiscal policy was highly supportive of growth last year even if a significant chunk of
support did not make it into the economy due to restrictions and was actually saved
% GDP Fiscal impulse: Decomposition of deficit changes in 2020 % GDP
8 8
7 7
6 6
5 5
4 4
3 3
2 2
1 1
0 0
Eurozone Germany France Italy Spain*
Discretionary One-offs Economic cycle Fiscal impulse Deficit change
Source: HSBC calculations based on national statistical institutes, Eurostat and European Commission, 2020 budgets and amendments. Notes: * Discounting the impact (0.9%
of GDP) of the incorporation of ‘Sareb’ under the public sector. The ‘Economic Cycle’ component for eurozone countries and the Big 4 includes the ‘normal’ short-time work
compensation schemes but not the extensions and more generous terms agreed in response to the COVID-19 crisis..
47. Stronger-than-anticipated growth has helped contain the fiscal deficits this year
despite fiscal policy remaining expansionary
% GDP Fiscal impulse: Decomposition of deficit changes in 2021 % GDP
5 5
4 4
3 3
2 2
1 1
0 0
-1 -1
-2 -2
-3 -3
Eurozone Germany France Italy Spain
Discretionary Economic cycle NGEU 'grants' 2020 One-offs expiring Fiscal impulse Deficit change
Source: HSBC calculations based on national statistical institutes, Eurostat and European Commission, 2020 budgets and amendments. Notes: The ‘Economic Cycle’
component for eurozone countries and the Big 4 includes the ‘normal’ short-time work compensation schemes but not the extensions and more generous terms agreed in
response to the COVID-19 crisis.
48. In 2022, the domestic fiscal policy stance should turn broadly neutral with the bulk of
expansion across the eurozone provided by the Next Generation EU (NGEU) fund
% GDP Fiscal impulse: Decomposition of deficit changes in 2022 % GDP
4 4
3 3
2 2
1 1
0 0
-1 -1
-2 -2
-3 -3
-4 -4
-5 -5
Eurozone Germany France Italy Spain
Discretionary Economic cycle NGEU 'grants' 2020 One-offs expiring Fiscal impulse Deficit change
Source: HSBC calculations based on national statistical institutes, Eurostat and European Commission, 2020 budgets and amendments. Notes: The adjusted series takes into
account that due to ongoing restrictions at least part of the stimulus implemented last year and this year did not actually feed through into the economy but will only do so once
restrictions are lifted.
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13 October 2021
Disclosure appendix
Analyst Certification
The following analyst(s), economist(s), or strategist(s) who is(are) primarily responsible for this report, including any analyst(s)
whose name(s) appear(s) as author of an individual section or sections of the report and any analyst(s) named as the covering
analyst(s) of a subsidiary company in a sum-of-the-parts valuation certifies(y) that the opinion(s) on the subject security(ies) or
issuer(s), any views or forecasts expressed in the section(s) of which such individual(s) is(are) named as author(s), and any other
views or forecasts expressed herein, including any views expressed on the back page of the research report, accurately reflect
their personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific
recommendation(s) or views contained in this research report: Fabio Balboni
Important disclosures
This document has been prepared and is being distributed by the Research Department of HSBC and is not for publication to
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1 This report is dated as at 13 October 2021.
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