Resurgent COVID-19 outbreaks in Europe are unlikely to trigger strict lockdowns, but soft restrictions and persistent uncertainty could still stymie the Continent’s economic recovery, especially in the south. European countries are fighting the simultaneous challenges of persistent vaccination hesitancy and rising COVID-19 infections amid the emergence of the more contagious Delta variant. In recent days, several governments have reintroduced restrictions on nightclubs, restaurants and bars in an attempt to curb cases among young, unvaccinated people. Some governments have also made vaccination mandatory for health workers and have warned that, unless vaccination rates improve, it could become compulsory for the entire population.

• According to the European Center for Disease Prevention and Control, 64% of the adult population in the European Union had received at least one dose of a COVID-19 vaccine as of July 13. The weekly number of COVID-related deaths in the bloc is low since a large part of “at-risk” populations have been vaccinated, but infections remain high among people under 30. 
• On July 12, French President Emmanuel Macron announced that vaccination will be mandatory for all healthcare workers. He also announced that either proof of vaccination or a negative COVID-19 test will be required to access bars, restaurants, cafes and shopping centers starting in August. Beginning in the fall, PCR tests will no longer be free of charge as well, in an effort to encourage vaccination. 
• On July 12, the Greek government announced that vaccinations will be mandatory for healthcare workers and nursing homes staff. The government also announced that only vaccinated people will be allowed indoors in bars, cinemas, theaters and other closed spaces.
• On July 9, the Dutch government reintroduced restrictions for bars, restaurants and nightclubs and canceled events involving large crowds until mid-August. 
• On July 11, the Portuguese government announced that people who want to dine indoors in 60 municipalities with high rates of COVID-19 infections must provide a vaccination certificate, a negative COVID-19 test or proof of previous infection. Restaurants in high-risk areas must also close at 10.30 p.m
• On July 12, the Spanish regions of Catalonia and Valencia banned social gatherings of more than 10 people and reduced the opening hours for bars, restaurants and nightclubs.
• On July 7, Cyprus said only fully vaccinated people and people with negative COVID-19 tests will be allowed to enter restaurants, bars and other venues. 

Continued uncertainty about travel rules will negatively impact the summer season in tourism-dependent Southern Europe. Ongoing vaccination campaigns mean this summer will see more travel activity in Europe compared with last summer. But constantly changing travel rules and domestic restrictions will still have a negative impact on the south’s tourism-dependent economies. And while domestic tourism could increase, it will also not compensate for the missing foreign visitors. This will result in fewer jobs being created in the south than if travel and lockdown rules were homogeneous and predictable across Europe. 

• Countries including Germany, Norway, Estonia and the Czech Republic have introduced different restrictions (such as quarantines and mandatory testing) for people traveling from Spain.
• The French government has advised people to avoid Spain and Portugal as travel destinations.
• On July 9, Malta announced that only visitors with complete vaccination will be allowed in the country. 
• The U.K. government has announced that from July 19, fully vaccinated people returning from the so-called “amber list” countries (which includes important holiday destinations such as Spain, Portugal, Italy, Greece and Croatia) will no longer have to quarantine, but a negative test will still be required to re-enter the United Kingdom. 
• On July 13, Portugal’s tourist board said that tourism in the country will only return to 2019 levels in 2023.
• A report by BBVA Research revealed that spending by foreign tourists in Spain during the first half of 2021 was 50%below the levels for the same period in 2019. 

Europe is unlikely to return to strict lockdown restrictions in the short term, but the current volatility in social distancing rules will still have a negative impact on the services sector. Europe is on track to reach herd immunity (with 70-80% of the adult population vaccinated) by the end of the year, even if booster shots may eventually be needed. In addition, governments will be very reluctant to reintroduce strict restrictions on social mobility given the negative impact on economic activity. Still, the ongoing uncertainty about lesser restrictions, with measures constantly being lifted and then reintroduced, will continue to negatively impact the services sector across the Continent and potentially result in worse-than-expected growth in 2021, especially in the south. The emergence of new variants could also result in tighter restrictions in the future.

• In early July, the European Commission predicted that the European Union’s GDP will grow by 4.8% in 2021 after shrinking by 6.2% in 2020. Brussels acknowledged that the Delta variant of COVID-19 was a “downside risk” for this forecast.