A restaurant has been closed during the lockdown on Mitropoleos Street next to Monastiraki Square in Athens, Greece on Monday November 9, 2020.

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LONDON – The euro zone economy contracted 0.7% in the final quarter of 2020 as governments tightened social restrictions to contain a second wave of Covid-19 infections, the European statistics bureau said on Tuesday.

A preliminary reading suggests an annual GDP decline of 6.8% for the euro area in 2020, Eurostat said.

The region had posted a growth rate of 12.4% in the third quarter as governments were able to partially reopen their economies at that time due to low infection rates.

However, the health emergency has worsened over the last three months of 2020, and Germany and France have even reinstated national bans. The tightening of social restrictions again weighed on economic performance.

Data released last week showed Germany grew 0.1% in the final quarter of 2020. Spain recorded GDP growth of 0.4% over the same period, while France contracted 1.3%. The numbers were above analysts’ expectations, suggesting that some companies had learned how to handle bans as best they could.

However, the three-month period also coincided with news of the first approvals of coronavirus vaccines, renewing optimism that the pandemic could end sooner than expected. However, the rollout has been slow and bumpy since then, and economists fear it will delay the much-needed economic recovery.

“The fiasco of the European vaccination schedule and Brussels’ withdrawal from the conflict with Britain and AstraZeneca have cast doubt on a recovery in Europe, confirmed the worst caricatures of botched bureaucracy and revived fears that the European Union might fall apart,” said Anatole Kaletsky , Founder of Gakeval Research said in a note on Tuesday morning.

In addition to the uneven distribution of Covid-19 jabs, the number of daily cases has also increased in the New Year due to the spread of new variants of the virus. Governments have therefore decided to extend or reintroduce lockdowns in order to contain the spread.

In this context, the International Monetary Fund has lowered its growth expectations for the euro area in 2021. The fund cut its growth forecast for the region this year by 1 percentage point to 4.2% last week. In Germany, France, Italy and Spain – the four largest economies in the euro zone – growth expectations for 2021 have been lowered.