London (CNN Business)Germany, the fourth largest economy in the world, is heading into a national lockdown that could send it into another recession — a major warning as countries like the United States try to battle a spike in coronavirus cases over the winter.
What's happening: Chancellor Angela Merkel said Sunday that Germany will go into a "hard" lockdown starting this week and continuing through the Christmas period. Non-essential shops and schools will be shut starting on Wednesday, and Christmas gatherings will be reduced from 10 people to only five from two different households.
The announcement comes after Germany recorded nearly 30,000 new coronavirus infections and almost 600 deaths within 24 hours on Friday, surpassing records.
Economy Minister Peter Altmaier said in an interview Monday that he thinks the country can avert another recession thanks to government support measures. Reuters reports that the number of people that will work reduced hours and have wages subsidized by the state is expected to rise.
"It is possible, if we act wisely, to once again preserve the economic substance of the country," Altmaier said. But he stressed that this "depends very decisively on the further course of events."
Given the extent of new restrictions, economists are worried.
"Germany must brace itself for a second recession," Dr. Jörg Krämer, Commerzbank's chief economist, told clients Monday.
Big picture: Germany isn't the only country grappling with a spiraling health situation. South Korea has also sounded the alarm about rising cases and could announce new social distancing measures. And London's mayor is asking the government to close schools for the holidays earlier than planned given a surge in infections in the city.
In the United States, as medical workers prepare to distribute the first doses of the Pfizer-BioNTech Covid-19 vaccine, the outlook for infections and hospitalizations remains extremely concerning. The country is nearing 300,000 deaths after hitting the 200,000 mark in September.
It's a reminder that while the rollout of vaccines is an important moment in a devastating pandemic, it won't be an immediate cure for the twin health and economic crises.
"After being the relative European success story in wave one, Germany has struggled over the last few weeks," Deutsche Bank's Jim Reid said in a research note Monday. The new lockdown, he said, would deal a short-term "blow to activity and confidence, even if the damage will be limited by knowledge of the imminent vaccine rollout."