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Dark déjà vu for European economy when virus cases increase

Europe’s economy just breathed a sigh of relief from what had been the sharpest recession in modern history. A resurgence in coronavirus cases this month is a bitter blow that is likely to turn what was meant to be a healing period for the economy into a lean winter with job losses and bankruptcies.

Bars, restaurants, airlines and countless other businesses are being hit by new restrictions as politicians desperately try to curb an increase in infection cases that quickly fill hospitals.

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The height of the pandemic last spring had caused the economies of the 1

9 countries using the euro to plunge by a massive 11.8% in the April-June quarter from the previous three-month period. About 1.5 million more people registered as unemployed during the pandemic. The damage was limited only by governments’ quick decision to spend hundreds of billions of euros (dollars) on keeping a further 45 million on payrolls and businesses going.

While the new restrictions so far are not as drastic as the near-total shutdown of public life introduced in the spring, they are kicking an economy that is down. For many Europeans, there is a false sense of déjà vu.

FILE – This Friday 2. October 2020 Stock Photo Photos of a woman walking past empty restaurants in central Lyon, central France. Europe’s economy just breathed a sigh of relief from what had been the sharpest recession in modern history. A re-flare in the coron

“It’s a disaster,” said Thomas Metzmacher, who owns a restaurant in Germany’s financial hub, Frankfurt, of the government’s decision to impose a curfew at 23.00.

He noted that even before the new restrictions, many people in his industry could only barely survive. The curfew means people who come in for a meal do not linger with a few extra beers or schnapps, which is where restaurants earn most of their profits. “Now it’s: go to a meal, finish your drink, pay, go home,” he says.


Experts say the course of the global economy depends on the health crisis: Only when the pandemic is brought under control will it recover.

Countries like China, which have so far avoided a major resurgence like Europe, are doing better economically. The United States never quite got its first wave under control, and its economy remains hampered by it.

Europe had reduced the number of infections much faster than the United States and managed to keep a lid on unemployment. But the narrative that contrasted Europe’s successes with the Trump administration’s failure to submit to the pandemic is quickly revised.

FILE – On this Monday, June 15, 2020 file image, a man takes his lunch on a terrace of a restaurant in Paris. Europe’s economy just breathed a sigh of relief from what had been the sharpest recession in modern history. A resurgence in coronavirus cases

As coronavirus cases rise again in Europe, economists are pushing their forecasts.

Ludovic Subran, chief economist at financial services company Allianz, says there is a high risk that the economies of France, Spain and the Netherlands will contract again in the last three months of the year. Italy and Portugal are also in danger. While Germany is also seeing an increase in infections, it is not that bad and the economy seems more resilient.


“We see an increased risk of a double recession in countries that in turn resort to targeted and regional lockdowns,” he said.

The pandemic is worsening just as governments are trying to ease the huge amounts of financial support they have provided to households and business owners.

Many governments have programs where they pay the majority of the wages to workers who are redundant in the hope that they will soon be able to return to work after the pandemic. In France and the United Kingdom, one third of the workforce covered at one time and 20% in Germany. They also provided cash handouts to households and grants to business owners.

Now governments are phasing out some of this support and aiming to provide more targeted assistance to people directly affected by new restrictions. It does not help people whose jobs are indirectly affected. A pub facing an exit ban can e.g. Be eligible to receive payroll support for its staff, but the brewery that provides it can not.

The impact will vary from country to country – while the UK is switching to a less comprehensive wage support plan, Germany has expanded its program.


As with the initial rise of the pandemic in the spring, the sectors in Europe most affected by frontiers of public life, services including travel and hospitality – are the ones most dependent on face – to – face contact.

Countries such as 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 United States and approx. 7% for France.

Major airlines in Europe expect to operate at around 40% of normal levels this winter, again reducing the number of flights. Lufthansa, British Airways and others are reducing tens of thousands of jobs as they do not expect a quick return to how things were before the pandemic – not even with state aid.

FILE – In this Sunday, March 8, 2020 file image, the Navigli district of Milan, one of Milan’s nightlife areas, is almost deserted after most bars were closed due to the coronavirus pandemic. Europe’s economy was just breathing from what h

Even where there are no strict restrictions, health hazards scare customers away, so stores are likely to see less business.

The EU provides 750 billion euros ($ 880 billion) in financial support to member states to cope with the fallout. Governments like Spain planned to invest in long-term projects such as renewable energy and technology. It now looks like they’ll have to spend more on just keeping the economy up. The European Central Bank injects 1.35 trillion euros ($ 1.6 trillion) into the economy, which continues to lend cheaply, even to countries with weak economies such as Spain and Italy.

But the longer the pandemic drags on, the more the decisions on how to use financial support become political, says economist Subran. Political parties are fighting for how resources should be deployed, and unions are on strike to influence the debate. It reflects the unrest in the United States, where a much-needed stimulus package has been delayed.


For Ludovic Nicolas-Etienne, a Parisian purchase of food among the stalls in central Bastille Square, it is a predicted tragedy. He blames the people who over the summer ignored safety recommendations to party and socialize after months of lockdown.

“I was expecting this,” he says, wearing a mask outdoors the day after France announced a state of emergency. “Some people are not responsible enough, so the good people pay for the bad ones.”

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