Washington, District of Columbia 2020-10-17 03:05:40 –
London (AP) —Europe’s economy was breathtaking as it was the sharpest recession in modern history …
London (AP) — Europe’s economy was breathtaking as it was the sharpest recession in modern history. This month’s resurgence of coronavirus cases is a pain that is likely to turn what was supposed to be a healing period for the economy into a lean winter of unemployment and bankruptcy.
Bars, restaurants, airlines and countless other companies are facing new restrictions as politicians are desperately trying to contain the growing number of infectious diseases that are rapidly filling hospitals.
Due to the high pandemic last spring, the economies of the 19 euro-using countries plummeted to 11.8% in the April-June quarter from the previous three-month period. During the pandemic, about 1.5 million people registered as unemployed. The damage was curbed only by the government’s swift decision to spend hundreds of billions of euros (dollars) to maintain an additional 45 million euros in salaries and business operations.
The new regulations are not as dramatic as the almost complete closure of public life imposed in the spring, but the economy is depressed. For many Europeans, there is a premonition of déjà vu.
“This is a disaster,” said Thomas Metsmacher, who owns a restaurant in Frankfurt, Germany’s financial center, about the government’s decision to impose a curfew at 11:00 pm.
He said that many people in his industry could hardly survive, even before the new restrictions. The curfew means that people who come to eat don’t stay long in some extra beer or schnapps, where restaurants make the most of their profits. “Now I go out to eat, finish drinking, pay, and go home,” he says.
Experts say the course of the world economy depends on the health crisis. It only recovers if the pandemic is suppressed.
Countries like China, which have traditionally avoided a major resurgence like Europe, are doing much better economically. The United States never has complete control over the first wave, and its economy remains hampered by it.
Europe was able to reduce the number of infections and control unemployment much faster than the United States. But the story of the Trump administration’s failure to quell the pandemic against Europe’s success is rapidly being revised.
With the new rise in cases of coronavirus in Europe, economists have significantly reduced their predictions.
Ludovic Subran, chief economist at financial services firm Allianz, said the economies of France, Spain and the Netherlands are at high risk of shrinking again in the last three months of the year. Italy and Portugal are also at risk. There is also an increase in infectious diseases in Germany, but not so badly, the economy appears to be more resilient.
“Countries that are reliant on blockades in targeted areas are at increased risk of a double-bottom recession,” he said.
The pandemic is getting worse, as the government was trying to ease the huge financial support it provides to households and business owners.
Many governments have programs that pay most of the salaries of redundant workers in the hope that they will be able to return to work soon after the pandemic. In France and the United Kingdom, it once covered one-third of the workforce, and in Germany it covered 20%. They also distributed cash to households and subsidized business owners.
Currently, the government is aiming to phase out some of its support and provide more targeted support to those directly affected by the new regulations. It does not help people whose work is indirectly affected. For example, a pub facing a curfew may be eligible for staff wage support, but the brewery that supplies it may not.
Impacts vary from country to country — Germany expanded its program while the UK was transitioning to a less comprehensive wage support program.
Similar to the first surge in the spring pandemic, the European sector, most affected by restrictions on public life, is services such as travel and hospitality, most dependent on direct contact between people.
Countries such as Spain, Portugal and Greece are heavily dependent on tourism. It accounts for almost 12% of Spain’s economy, less than 3% in the United States and about 7% in France.
Major European airlines are expecting to operate at about 40% of normal levels this winter and are reducing flights again. Lufthansa, British Airways and others are cutting tens of thousands of jobs because they don’t expect a quick return to the pre-pandemic situation with government support.
Even in the absence of strict restrictions, health hazards can scare customers and stores can be less business.
The EU is providing € 750 billion ($ 880 billion) of financial support to Member States to deal with fallout. Governments like Spain were planning to invest in long-term projects such as renewable energy and technology. Now it seems they have to spend more money just to lift the economy. The European Central Bank has invested 1.35 trillion euros ($ 1.6 trillion) in the economy and continues to borrow cheaply even in weakly financed countries such as Spain and Italy.
But the longer the pandemic, the more political the decision on how to use financial assistance will be, says economist Subran. Political parties are fighting over how to deploy resources, and unions are striking to influence the debate. This reflects the turmoil in the United States, where the terribly needed stimulus is delayed.
It’s a foretold tragedy for Ludovic Nicholas Etienne in Paris, who buys food at the stalls on Place de la Bastille. He accused people of ignoring party and social safety recommendations after a few months of blockade during the summer.
“I was expecting this,” he said, wearing a mask outdoors the day after France announced the state of emergency. “Some people aren’t fully responsible, so good people pay bad people.”
Oleg Cetinic in Paris and Christoph Noelting in Frankfurt contributed to this report.
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