The challenges of European countries in recovering economic crisis due to Covid-19

European countries have to step up the implementation of the dual task of fighting epidemics and economic recovery to enhance the position of the whole bloc in the context of an increasing threat of a new avian flu outbreak across the continent. Meanwhile, statistics show that in the Eurozone, the unemployment rate is still rising, while inflation is sinking into the negative zone.

Photo: AmCham EU

The resurgence risk of the coronavirus outbreak

Since the beginning of the year, the covid translation swept into Europe and became worse and worse. When the epidemic slowed down and seemed to be under control, most European countries loosened their bans and social distancing, and the economies reopened.

Nevertheless, as the economy gradually recovered, Europe is facing a new outbreak in European Union (EU) member countries with the number of new cases skyrocketing, threatened to bring Europe back into the "hot spot" of the epidemic and engulf the regional economy in recession, poses challenges for a recovery of the European economy. Hence, the authorities in many European countries have raised the level of warnings and tightened the anti-pandemic measures. French Health Minister O.Véran admits France is in a worsening epidemic and it is likely that the Paris capital will be imposed with maximum warning about the risk of Covid- 19 from October 5. Meanwhile, in Spain, the government extended stringent restrictions across the capital.

Job unemployment and inflation

The respread of Covid-19 pandemic was destroying the EU, in the context that this region has received negative ecnomic news. According to the official figures of the European Bureau of Statistics (Eurostat), the unemployment rate in 19 countries in the Eurozone increased to 8.1% in August 2020, equivalent to 13.2 million people losing their jobs. Meanwhile, Eurostat believes that Eurozone inflation has fallen deeper and fell into "negative zone" in recent months in the context of gloomy spending demand; Eurozone inflation fell to -0.3% in September 2020, further and further away from the target of about 2%. According to Eurostat, analysts concerned that, with the current "new Covid-19 wave", the economic recession in the EU is prolonged and the unemployment rate will increase further in the coming months. as wage assistance programs expire.

However, once the “new Covid-19 wave” spreads across the EU, its devastation to the regional economy may be even more arduous than the crisis earlier this year, especially in the context of the economies, businesses and people were all exhausted from the epidemic. Therefore, the current economic recovery plan may not be enough to protect and revive the EU's economy.

An impending wave of insolvency

McKinsey surveyed more than 2,200 companies in five countries including France, Germany, Italy, Spain and the UK, and said that 55% of the companies surveyed will have to close by September 2021 if profits continue sluggish as at present. This survey results were announced in the context of many warnings about an impending wave of bankruptcy (companies often face cash flow crises due to small size). The International Monetary Fund and many other organizations in Europe call on governments to double their budget support to help companies get through the COVID-19 pandemic.

In Europe's number one economy, Germany, the Central Bank (Bundesbank) has warned its banks to prepare for the increase in the number of default companies in the next quarter, during the epidemic crisis pushed weak companies into a difficult situation. Due to the expiration of the deferred payment order for insolvent companies, Bundesbank said the number of defaults could increase by more than 35%, to more than 6,000 companies/quarter, the highest level since 2013.

Restrictions in travel due to the Covid-19 pandemic’s yet non-termination

Another challenge to recover the economy is that the hotel and aviation industries will continue to suffer toll due to travel constraints and assemblies. Aside domestic holidays, the absence of major events and foreign visitors has hurt the tourism industry.

Besides, closes, social gaps and related disruptions in supply chains and lower demand have resulted in a record collapse in economic activity.

In order to deal with both economic and social "double crisis" caused by the Covid-19 pandemic, members of the European Union are concentrating resources against epidemics and economic recovery. The EU has approved the Euro 750 billion economic recovery plan. In addition, the European Central Bank (ECB) has also pumped € 1,350 billion into the regional economy to keep loans at low interest rates, while printing new money until at least the next mid-year.

#Europe #AdvancedCountries #Covid19

References

https://www.imf.org/en/News/Articles/2020/09/24/na092820-central-eastern-southeastern-europe-after-covid-19-securing-recovery-wise-public-investment

https://nhandan.com.vn/binh-luan-quoc-te/thach-thuc-moi--619159/

Phuong Dung