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Europe’s summer of recovery is more fragile than it looks

ALBUFEIRA, Portugal – Until last week, Raissa Moura and her colleagues at the reception at Pine Cliffs Resort felt optimistic that life was returning to normal along Portugal’s Mediterranean coast.

The previous year, when the pandemic stopped the journey, they had worried about the wilderness of the normally busy 1,300-bed hotel and villa complex. They had suffered layoffs and worked for weeks in an eerily quiet lobby that dealt with cancellations. Outside, foxes boldly wandered the abandoned grounds.

But this summer was already in good shape in the Algarve, Portugal̵

7;s leading tourist destination. Cases of Covid-19 had dropped so dramatically that Britain had designated Portugal as a so-called green country, allowing its citizens to visit without having to quarantine on return. The loungers under the pine trees were full of people hoisting cocktails. The resort’s eight swimming pools echo with the sound of splashing children.

“It feels hopeful,” Ms Moura, 28, said recently. “The resort is alive again.”

But the next day, London shot Portugal by revoking its green country status, citing a worrying rise in cases. Mrs Moura and her colleagues relied on yet another increase in cancellations. Along the coast – from palapas by the sea to restaurants on cliffs to car rental parties – people whose livelihoods depend on tourists suddenly began to prepare for another lost summer.

“People were like, ‘Here we go again,'” Moura told me the day after the news broke.

I traveled here from London in early June to report on what should be a story of a country reopening to the world, an encouraging example of Europe finally recovering from the economic catastrophe that accompanied it. worst pandemic in a century. Portugal had absorbed the worst of Europe’s double-deep recession in the first months of this year after imposing severe brakes on economic life to stifle the virus. Now it was ready to reap the rewards and recover faster.

But the story of Portugal’s unfolding summer turns out to be a tale of the stubborn endurance of the pandemic and the unstable nature of expectation, as the virus thwarted plans to resume ordinary life. Despite signs of progress, no one knows what will happen next – in Portugal, across Europe and across the global economy. Ambiguity forces companies and families to tread carefully, postpone investments, delay plans to travel and postpone decisions while waiting for evasive security – a state of mind that in itself can sustain the downturn.

Ever since the pandemic, politicians in affluent countries have portrayed lockdowns as an attempt to stop the spread of coronavirus. Governments calmed the workers concerned while waiting for the threat to public health to subside. Eventually the mindset went, they could safely turn on the economy again.

Portugal’s season of doubt underscores how economies do not come with built – in on / off buttons. Resorts are struggling to hire seasonal workers because workers are reluctant to risk traveling to the region as long as future closures remain possible. Local workers are careful with their money. Resorts postpone upgrades and deprive construction workers of jobs. Potential visitors need to navigate the complexity of changing government policies regarding quarantine and test requirements.

“It’s not a simple turn on and off,” said Pine Cliffs Resort general manager Thomas Schoen. “It’s been a stop and go all the way along the line.”

The big picture in Europe is becoming increasingly positive. After fumbling the initial phase of the vaccination campaign, Europe has gained momentum, allowing governments to ease restrictions. Shops have reopened in all 27 countries of the European Union, while cafés and restaurants are allowed to serve outdoors. Economic activity in the service sector has increased.

Economists expect the 19 nations that share the euro currency to experience robust economic expansion this year – a rate of 4.2 percent, according to a recent forecast from Oxford Economics.

Central to optimism is the fact that Europeans are increasingly on the move, indicating a potentially lucrative summer tourist season.

Within the euro area, use of public transport increased in May, reaching 72% of its pre-pandemic level, according to tracking data collected by Jefferies, a financial services company. Aviation activity rose up to 28 percent of its level before Covid-19, and visits to booking site websites jumped to 110 percent of its level before Covid, up from 40 percent in December.

Countries that are heavily dependent on tourism probably seemed to benefit, among them Greece, Italy and Spain. No one was better off than Portugal, where – before the pandemic – tourism accounted for almost a fifth of total economic activity, according to government data.

During the first three months of the year, when the government introduced a lockdown, Portugal’s economy fell by an alarming 3.3 percent compared to the last quarter of 2020 – far worse than the sliding 0.6 percent experienced by the eurozone.

The pain seems to have yielded a significant gain: From January to May, Portugal’s new Covid cases plummeted to less than 200 a day from more than 15,000.

“We are already starting to see a better public health picture, and so is the economic picture,” said Ricardo Amaro, a senior economist at Oxford Economics.

Britain’s decision to build Portugal as a green country was particularly important. The British traditionally flock to Portugal as a respite from their often sad weather, just as New Yorkers use Florida to escape the winter.

Portugal received more than 2 million visitors from the UK in 2019, according to the National Tourism Committee. Only neighboring Spain sent more.

In the Algarve – a coastal empire of villas, resorts and golf courses – the region’s unemployment is stubbornly above 10 per cent compared to 7.1 per cent for Portugal as a whole. The revival of tourism should solve that.

At a fish market in the town of Quarteira, the reopening of restaurants created a new demand for the briny-scented harvest of sea bass, squid, squid and shrimp.

“This year is much better than last year,” Assunção Gomes said as she tended to the market stall she oversees her mother.

But for most local merchants, the recovery was more ambitious than it seems.

Carlos Martins, a 41-year-old father of two, supports his family by working on a fishing boat and pulling in nets full of sardines. In previous summers, the price of sardines has reached 7 euros per. Kilogram (about $ 8.50) when wholesalers arrived from Spain to catch the catch. When foreign buyers stayed away last year, prices dropped by 85 percent, pulling his wages down by almost as much.

“We are all waiting for the prices to recover,” said Mr. Martins. “When the fish are almost free, the fishermen do not get paid.”

Vera Galvão had been working as a waitress in her father’s fish restaurant for more than two decades when the pandemic erupted and forced the company to close.

Most workers continued to draw pay slips under furlough schemes in force in much of Europe. But when Ms Galvão went to the paper to receive benefits, she was horrified to hear that she was not entitled: Her father had failed to pay the required taxes, she said.

Between May and July last year, Galvão, 41, a single mother of two, relied on loans from friends to buy groceries. She now works for a nonprofit that collects food from supermarkets in the area and delivers it to households in need.

“Many, many people who have lost jobs have still not been able to find new ones,” she said.

Continued anxiety about job security limits sales for local businesses and discourages them from hiring – a feedback loop with meager fortunes.

At a beachfront café in Quarteira, glass shelves display freshly baked cakes – regional delicacies such as fig and almond cake and national standby such as Portuguese peas. But sales are weak, complained the proprietor, Manuel Picareto, 71. Most of his customers are locals working in tourism.

“Instead of two baked goods, people buy one,” Picareto said.

When homeowners canceled tours last year, they scrapped the maintenance and landscaping of the pool and ravaged the books from AlgarvePool.com, a company owned by a Ukrainian couple, Iryana and Sergii Liashenko.

“Our income has dropped by 75 percent,” said Ms. Liashenko, 37.

Liashenkos had felt hopeful when their phone rang in recent weeks. Homeowners returned. Their pools and gardens were suffocated by weeds and algae. Irrigation systems needed to be repaired.

“We think we’ll get more money,” Liashenko said.

A few hours later, the British government withdrew Portugal’s coveted green country designation. The news resounds like a thunderstorm on a wedding day.

“Everyone is crying,” said Cláudio Lopes Meireles, a Brazilian who owns a gelateria in Albufeira, using an indescribable word to describe what Britain had just done to local fortunes. “We live off English tourists.”

In anticipation of fewer sales, he limited his purchases of imported supplies – pistachios from Sicily, cocoa from Belgium – and exported austerity to the rest of the continent.

At a nearby liquor distributor called Empro, executives pointed to a stack of 800 boxes of hard cider stacked almost to the beams inside a cavernous warehouse, wondering if they would find takers before the contents expired.

Empro relies on UK visitors for more than two-thirds of its sales. Cider was among several products it had stocked to cater for unique British flavors. Tourism can benefit from the European Union’s newly developed Covid certificates, which allow travel for those who have been fully vaccinated or have recently been tested. But Empro’s marketing manager, Susana Cavaco, waved the suggestion that visitors elsewhere could compensate for the loss of Brits, given their legendary propensity to consume large amounts of alcohol – beer on the beach, followed by cocktails and wine at noon.

“No one drinks like the British,” said Mrs. Cavaco.

The London government would not reconsider its green land list for another three weeks.

At Pine Cliffs Resort – a complex of white buildings topped by terracotta tiles placed on a commanding perch over the sea – management has struggled to recruit enough seasonal workers, leaving the property understaffed by approx. 25 percent, said Schoen, general manager.

Given the need for social distancing, it may not run the breakfast buffet, but it lacks enough staff for efficient sit-down service, so guests wait at the tables for orders.

Mr. The shoe has built up cash reserves against future problems. He has postponed an investment in a new kids club and delayed the planned renovation of restaurants.

“I believe in the good things that are to come, but we must also be realistic,” Schoen said. “I am not convinced that we have overcome every bump in our way. We will hold back until there is a good level of security. ”

The next day, Britain downgraded Portugal from an approved holiday destination to a potentially dangerous breeding ground for coronavirus variants.

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