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The second wave of the coronavirus hits Europe in very other ways. JPMorgan has a idea about this

View of Piazza di Spagna on October 20, 2020 in Rome, Italy.

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LONDON – There is no doubt that Europe is experiencing a second wave of coronavirus infections, but the surge is not affecting major economies in the same way.

There has been a sharp increase in cases from late August to early September in the UK, France and Spain, as well as the Netherlands. But Italy and Germany have lagged behind their counterparts, and only now are the numbers starting to rise dramatically.

JPMorgan analysts have looked into the phenomenon and believe they know what is behind the inequality.

"In our view, the difference between Germany and Italy on the one hand and France, Spain, the Netherlands and Great Britain on the other hand is most likely not the mobility, but the width of mask wear and the effectiveness of the test and trace regime," said JPMorgan economist David Mackie in a note on Thursday.

Spain and France hit grim milestones of over 1 million coronavirus cases each on Wednesday, while the UK is lagging behind with just over 792,000 cases, according to a record held by Johns Hopkins University.

Italy, where the virus first appeared in Europe in February, and Germany have around 449,000 and 398,000 confirmed infections, respectively. But they, too, are now seeing a rapid increase in some cases.

Germany reported more than 11,200 new Covid-19 cases on Thursday. For the first time since the pandemic began, more than 10,000 new cases were recorded in a single day. On Wednesday, Italy reported 15,199 new cases from the previous day, which is the biggest boom since the second wave began.

Test-and-trace and masks

"The effectiveness of such (test-and-trace) regimens is multidimensional and depends on the speed at which infectious individuals are identified, the number of contacts they have made that can be quickly traced, and compliance with isolation requirements," noted Mackie.

He acknowledged that given the lack of data available, the success of these prosecution programs is difficult to quantify – although Germany has spearheaded its contact tracing regime for the country's relatively low case numbers and death rate.

Other restrictions on public behavior, particularly the wearing of masks, could also play a role, JPMorgan said.

According to German regulations, state masks should be worn in public transport and in public places indoors, while Italy stipulates that they should be worn in all public places, also in Spain.

In the UK, masks must be worn in shops and public transport. The Netherlands advised the public to wear masks indoors in public places in early October, but this is still not mandatory despite the fact that it is public transport.

Mackie noted that wearing masks could have a huge impact on the rate of reproduction of the virus, but said it was difficult to quantify "because it's not just government requirements that matter, but compliance."

He believes the level of punishment for not wearing a mask may indicate "that compliance will be higher in countries with greater financial consequences for non-compliance".

"It is certainly the case that mask requirements and fines are the least onerous in the Netherlands, as the number of new infections has increased the most dramatically. Meanwhile, Italy has among the strictest requirements and the highest fines, and the second wave in Italy is much more moderate than in the Netherlands, "he said.

"This certainly suggests that wearing masks may be part of the explanation for the cross-country differences in new infections across Europe," said Mackie, acknowledging the limitations of the hypothesis.

Lag effect?

JPMorgan noted that a delay effect could also be a reason for the lower numbers in Germany and Italy.

"It is entirely possible that Germany and Italy are only two to three weeks behind other countries. Given the exponential growth in new infections, the picture can change very quickly, and in particular infections in both countries have accelerated in the last few days," said he

Mobility trends could play a role in different infection rates, as more trips were made during the summer vacation when the locks were lifted and then as students returned to schools and universities, he argued.

However, after analyzing mobility data from Google and Apple, JPMorgan was unable to explain any discrepancy between the countries, as the data showed that Germany and Italy had seen the largest increases in mobility since the end of the initial lockdowns.

"Therefore, it does not seem that differences in mobility – and thus in daily contacts – explain cross-border differences in the pace of new infections. This means that other determinants of effective reproductive numbers influence the cross-border experience."

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