AZN Astrazeneca Plc

By Marcus Walker in Rome and Bojan Pancevski in Berlin 

The European Union's economy and vaccination effort have been mired for months while the U.S. and U.K. race ahead toward recovery from the pandemic. But the EU's fortunes could change by midyear -- provided that mishaps stop hampering its vaccine supply.

Amid rising social and political pressure, and despite setbacks, including new safety fears over the vaccine made by AstraZeneca PLC, European policy makers and analysts are expressing cautious optimism that the summer could bring a turning point, when vaccine makers say production will accelerate sufficiently to reopen the economy before fall.

The hoped-for vaccination breakthrough that experts estimate could see over 50% of the EU's adult population inoculated by late July will depend on the seamless supply of shots from multiple manufacturers, as well as overcoming the logistical and administrative challenges that have so far plagued the rollout. The EU's vaccine problems in recent months have ranged from bureaucracy and the public's hesitancy to key suppliers slashing deliveries due to manufacturing issues.

The EU expects to receive 360 million doses of Covid-19 vaccines in the second quarter, a sharp improvement on the 107 million doses it received in the first quarter. The rising supply is coming mainly from the vaccine developed by Pfizer Inc. and BioNTech SE, which is becoming the mainstay of the EU's inoculation campaign. Nearly 68 million doses of the vaccine were delivered in the first quarter and 200 million are expected in the second quarter.

"The capacity is rapidly increasing," Thierry Breton, the European Commissioner overseeing the EU's vaccine strategy, said in a social-media post on Thursday. Vaccine production in Europe is more than doubling every month, he said, offering hope for an end to lockdowns. "I'm afraid we're nowhere near 'normal' yet, but I am confident that we will find some normality soon."

The U.K.'s experience shows how vaccinating vulnerable groups can rapidly reduce deaths and hospitalizations from Covid-19 and pave the way for economic reopening. The British government wants to lift restrictions gradually between April and June.

That prospect currently seems distant to continental Europeans suffering the misery of yet another round of lockdowns. France this week began its third nationwide lockdown of the pandemic while Germany is considering introducing one.

But an end to the EU's funk is coming into sight. "The gap between the EU and the U.K. will close, thanks to an impressive ramp-up of vaccinations in the EU," said Mujtaba Rahman, European head of risk consulting firm Eurasia Group.

"The political mood in the EU will turn quite quickly as well, just as it has done in the U.K. on the back of vaccinations," he said. "All everyone cares about is getting back to normal."

Economists believe the EU economy will probably rebound powerfully in the second half of this year. Data show much of Europe's manufacturing industry is recovering, while many service sectors have found a way to coexist with the persistent restrictions on daily life.

Europe's economic pain is increasingly concentrated in tourism, bars, restaurants and other activities that are currently shut or tightly restricted, but healthy household incomes and pent-up demand for entertainment mean even those sectors could start to revive by late summer.

The EU's official goal is to achieve herd immunity by the end of summer. Although some observers say that target is too optimistic, forecasters say even inoculating half of the adult population would probably be enough to reduce Covid deaths and allow for reopenings.

"Based on what is happening in the U.K., vaccinating roughly 50% of adults is the threshold you need to get to for governments to feel comfortable about lifting restrictions," said Andrew Kenningham, chief European economist at Capital Economics in London. "We expect it will be a phased process in July, August and September, depending on the country, the pace of vaccinations and the prevalence of the virus."

Still, the EU's vaccination delays probably doom Southern Europe's tourism-heavy economies such as Greece, Spain and Italy to another lost summer, Mr. Kenningham said--at least until late in the season.

The risks to a rosier outlook include the threat of mutant virus variants and further setbacks to vaccine supplies.

Public patience is also wearing thin in many countries after months of on-again, off-again lockdowns.

Germans' trust in their government's competence has fallen as Chancellor Angela Merkel has wrestled with the country's 16 states. Restrictions, loosened in March despite worsening Covid contagion, could now tighten again.

In France, public anger was roused by media reports of clandestine dinners among the social and political elites of Paris, in defiance of social-distancing rules. And in Italy, restaurateurs fought with police outside the national Parliament in Rome earlier this week amid growing frustration and hardship in the sector.

Unlike in spring 2020, when tough lockdowns eventually suppressed Covid infections in most of Europe, months of sacrifices since late last year have seemingly borne little fruit. Infections, hospitalizations and deaths have remained stubbornly high in the EU's major countries.

Health experts partly blame the spread of the more aggressive U.K. virus variant throughout Europe, dwindling compliance with social distancing rules by a weary public and the fact that many people continue to go to their workplaces in factories and offices.

A year ago, wild animals wandered the streets of deserted European cities. Now, traffic and commuters are back, albeit at lower levels than normal. Mobility data show rising movement despite restrictions.

Workplaces and schools are among the main sources of infection in Germany, according to the country's disease-control center, the Robert Koch Institute. Ms. Merkel's government has struggled to coax businesses to let their staff work from home.

In contrast, Nordic countries such as Norway and Finland have kept infection rates down thanks partly to widespread working from home. Denmark, whose fight against the virus has also benefited from one of Europe's most effective testing regimes, even began to reopen this week and plans to lift most restrictions by late May.

Matthew Dalton in Paris contributed to this article.

Write to Marcus Walker at marcus.walker@wsj.com and Bojan Pancevski at bojan.pancevski@wsj.com

(END) Dow Jones Newswires

April 09, 2021 04:46 ET (08:46 GMT)

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