EU Commission: This Covid wave will not hit economy as hard

He said it is "not only because the economy is more adapted to infections, but because we have vaccines" - and a high rate of vaccination will help avoid a more serious economic impact.

Gentiloni however did warn that the service economy, which is more contact-intensive, will be the first to be affected - but added that member state governments should decide whether to keep them open or close them.

"Our only message is to take the situation very seriously but without thinking that the economic impact will be the same as one year ago," he said.

The EU's public health agency, the European Centre for Disease Prevention and Control (ECDC), warned in a report on Wednesday of high risks of a spike in deaths and hospitalisations in December and January, if measures were not introduced.

The World Health Organization meanshile said Covid-19 cases jumped by 11 percent in Europe in the last week, the only region in the world where the virus has continued to increase since mid-October.

Several member states, including Austria, Belgium, and the Netherlands, have already introduced more restrictive measures to curb the infection rate.

Back to prudence

The commission said Europe's economy is bouncing back from the recession.

However, it added, that there are several risks such as high energy prices, inflation (both of which the EU executive estimates to soften next year) and supply-chain bottlenecks.

In its assessment of national budgets of member states, the commission warned that countries with high debt levels, such as Belgium, France, Greece, Italy, Portugal and Spain, might lift current spending measures more than their potential growth rate.

The commission also urged Italy to rein in government spending growth, as the country's debt-to-GDP ratio is more than 150 percent.

The EU executive urged prime minister Mario Draghi's government to follow a "prudent" economic policy.

"We have to ensure a debt reduction path that is not in contradiction with growth," Gentiloni said - adding that Italy's economy is in "good shape".

The issue goes to the heart of the looming debate within the EU on the rewriting of the bloc's deficit rules in the wake of the financial crisis and the pandemic.

The debate could reignite a fierce disagreement between souther nand northern member states on debt sustainability and deficit.

The EU executive is expected to come up with concrete proposals only next year. The rules have been suspended in the wake of the pandemic so that governments can stimulate their economies.

"What we are discussing is exactly how we can build a consensus among member states to have realistic and enforceable common rules," Gentiloni said.

He suggested that even when the suspension of rules ends, ti will not be 'business-as-usual' anymore.

"It's not that we finish with the general escape clause and we simply go back to where we were and with consequences that everyone can guess," he said.

Despite mounting risks, the EU economy is projected to growth by five percent this year, and 4.3 percent next year.