The European economy is only catching its breath from what has been a sharp decline in modern history. The resurgence of coronavirus cases this month is a bitter blow that is likely to turn into a period of economic recovery in a lean winter of unemployment and losses.
Bars, restaurants, airlines and many other businesses have been hit by new restrictions while trying to contain an increase in cases of infection that are rapidly filling hospitals.
GET ON THE GO FOX BUSINESS TO CLICK HERE
The height of the pandemic last spring caused the economies of 19 countries using the euro to sink by a massive 11.8% in the April-June quarter from the previous three-month period. Nearly 1.5 million more people were registered as unemployed during the pandemic. The damage was only contained in the government’s quick decision to spend hundreds of billions of dollars (dollars) to keep another 45 million in payroll and operating companies.
While the new restrictions are not as drastic as they are close to the total closure of public life imposed in the spring, they are kicking off a losing economy. For many Europeans, there is a foreboding definition of déjà vu.
“It was a disaster,” said Thomas Metzmacher, who owns a restaurant in the German financial center, Frankfurt, of the government’s decision to impose an 11 pm curfew.
He said that before the new restrictions many people in his industry could only survive. The curfew means that people who come to eat will not last long for some extra beer or schnapps, where restaurants make a lot of money. “Now this: eat, finish the drink, pay, go home,” he said.
CORONAVIRUS STIMULUS DEAL CLUS TO Election A ‘Large’ RISK FOR TRUMP: MULVANEY
Experts say the course of the global economy depends on the health crisis: Once the pandemic is under control, it will recover.
Countries like China, which have avoided a major revival like Europe, are economically healthier. The US never got the first wave under control and its economy remains hot on it.
Europe has reduced the number of infections faster than the US and managed to keep the cap on unemployment. But the narrative that differs from Europe’s victories against the Trump administration’s failure to fail the pandemic has quickly changed.
As coronavirus cases rise again in Europe, economists are killing their forecasts.
Ludovic Subran, chief economist at financial services firm Allianz, said there was a high risk that the economies of France, Spain, and the Netherlands would contract again in the last three months of the year. Italy and Portugal are also at risk. While Germany is seeing an increase in infections, it is also not bad and the economy seems more resilient.
ATTRACTIONS Expected to leave greater GAP working skills during the COVID-19 JOBS SWOON
“We see a high risk of a recession in countries reusing targeted and regional lockdowns,” he said.
The pandemic is exacerbated as governments try to reduce the enormous financial support they provide to households and business owners.
Many governments have programs in which they pay most of the workers’ wages in excess of their hopes of returning to work after the pandemic. In France and Britain occupying one-third of the labor force at one point, and 20% in Germany. They also provide cash handouts to households and grants to business owners.
Governments are now removing some of that support and aiming to provide more targeted assistance to people directly affected by the new restrictions. That will not help people whose jobs are affected indirectly. A pub facing a curfew, he said, would be eligible to get wage support for its staff but the brewery that provides it may not.
The impact will vary between countries – as Britain moves to a less comprehensive wage support plan, Germany expands its program.
PFIZER CAN APPLY FOR COVID-19 VACCINE EMERGENCY USE LAST NOVEMBER
Like the initial outbreak of the spring pandemic, the sectors in Europe that are most affected by public life limits are services including travel and hospitality – those that rely more on communicating in front of people.
Countries like Spain, Portugal and Greece are heavily dependent on tourism. It accounts for almost 12% of Spain’s economy, compared to less than 3% for the US and about 7% for France.
Major European airlines are expected to operate at almost 40% of normal levels this winter and are cutting back on the number of flights. Lufthansa, British Airways and others are cutting off thousands of jobs because they expect no immediate return to how things were before the pandemic – even with government assistance.
Even where there are no hard restrictions, health risk scares customers, so stores are likely to see fewer business.
The EU is providing 750 billion euros ($ 880 billion) in financial support to member countries to cope with the collapse. Governments like Spain plan to invest in long-term projects such as renewable energy and technology. It now appears that they will spend more than just maintaining the economy. The European Central Bank is injecting 1.35 trillion euros ($ 1.6 trillion) into the economy, which continues to be cheaply borrowed even for low-income countries such as Spain and Italy.
But the longer the pandemic, the more decisions on how to spend financial aid will be political, says Subran, the economist. Political parties are fighting over how to deploy resources, and unions are going on strike to influence the debate. This reflects the turmoil in the US, where a much-needed stimulus package was delayed.
CLICK HERE TO READ MORE IN FOX BUSINESS
For Ludovic Nicolas-Etienne, a Parisian shopping for food in the stalls of Bastille’s central square, it was a tragedy foretold. He blames people who in the summer ignore safety recommendations to partake and socialize after months of incarceration.
“I look forward to it,” he said, wearing a mask outside the day after the state of the emergency was announced. “Some people are not responsible enough, so good people pay for the bad.”