Austria will become the first country in western Europe to reimpose a full COVID-19 lockdown, it said on Friday as neighboring Germany warned it may follow suit, sending shivers through financial markets worried about the economic fallout.

A fourth wave of infections has plunged Germany, Europe's largest economy, into a national emergency, Health Minister Jens Spahn said, warning that vaccinations alone will not cut case numbers.

Austria said it would require the whole population to be vaccinated as of February, a decision bound to infuriate many in a country where skepticism about vaccines runs high, encouraged by the far-right Freedom Party, the third-biggest in parliament.

The party is planning a protest against coronavirus restrictions on Saturday.

Roughly two-thirds of those eligible in Austria are fully vaccinated against COVID-19, one of the lowest rates in western Europe. Its infections are among the highest on the continent, with a seven-day incidence of 991 per 100,000 people.

"We have not succeeded in convincing enough people to get vaccinated," Chancellor Alexander Schallenberg told a news conference, saying the lockdown would start on Monday and the requirement to be vaccinated on Feb. 1.

"It hurts that such measures still have to be taken."

Asked if Germany could rule out an Austrian-style full lockdown, Spahn said: "We are now in a situation – even if this produces a news alert – where we can't rule anything out."

"We are in a national emergency," he told a news conference.

European stocks retreated from record highs while government bond yields, oil prices and the euro tumbled as the specter of a fresh COVID-linked lockdown in Germany and other parts of Europe cast a fresh shadow over the global economy.

"We expect targeted measures (against COVID-19) across some countries mainly according to the health situation, but other factors, such as domestic political situations, will be relevant," Oxford Economics analysts said in a note.

"And while it might take a while before a political consensus can be reached in other countries, it is clear that the tide has turned."

As cases rise again across Europe, a number of governments have started to reimpose limits on activity, ranging from Austria's full lockdown to a partial lockdown in the Netherlands and restrictions on the unvaccinated in parts of Germany, the Czech Republic and Slovakia.

(With input from agencies)