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Chief economist update: Europe, we have a problem

Just as Victorian Premier Dan Andrews toasted each and every Victorian with caramel-iced doughnuts and a top-shelf bottle of Starward whiskey to celebrate the end of Melbourne's lockdown, European governments -- one after the other -- have been announcing harsher and tighter restriction and lockdown measures.

They want to have what "Dictator Dan" proved could be had - their doughnuts and whiskey too.

Governments across Europe have already or are on the verge of implementing tougher regulations - in one form or another -- to control and contain the exponential growth in coronavirus infections in the continent.

Total cases of infections have been multiplying in the region since restrictions were lifted towards the end of June - just in time for summer and bitching (about the restrictions) turned into beaching (in celebration).

Eased social and lockdown restrictions were just what the virus needed to re-spread.

Based on World Health Organisation (WHO) tally, the total cases of infections to date have risen by 644% in France since the end of June; by 320% in Spain; 224% in the UK; 139% in Germany; and, 135% in Italy.

No prizes for guessing but the consequent tightening of restrictions would -- just as they have in the first wave - freeze economic activity that would  almost certainly lead to a double-dip recession in Europe that, in turn, would make imperative increased government spending and monetary policy accommodation.

The problem is Europe's problem is also the world's problem. Short of having a vaccine, the threat of infection taking a tour elsewhere in one or more parts of the planet would remain as long as the virus remains in play. It'll also take a toll on international trade.

Read our full COVID-19 news coverage and analysis here.

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