Home / World / Europe’s economic recovery is a summer memory

Europe’s economic recovery is a summer memory

LONDON – The faint hopes that Europe was recovering from the economic catastrophe caused by the pandemic have disappeared as the lethal virus has resumed rapidly spreading across much of the continent.

After booming in the early part of the summer, the UK economy grew far less than expected in August – just 2.1 per cent from July, the government reported Friday, adding to concerns that further weakness is taking place. prospects.

Earlier this week, France, Europe’s second largest economy, lowered its forecast for the pace of expansion for the last three months of the year from an already low of 1

% to zero. Overall, the national statistics agency predicted the economy would contract 9% this year.

The decline in expectations is a direct consequence of the alarm over the resurgence of the virus. France reported nearly 19,000 new cases on Wednesday, a one-day record and nearly double the number the day before. The wave prompted President Emmanuel Macron to announce new restrictions, including a two-month closure of cafes and bars in Paris and surrounding areas.

But most economists thought better days would only last as long as the virus was contained. The restrictions imposed by governments appeared less important than the willingness of consumers to interact with other people, returning to workplaces and commercial areas.

In a report this week, Oxford Economics, a research institute in London, analyzed data across the eurozone, noting that much of the improvement in late summer was the result of factories returning to life after the closing. For the expansion to continue, people must purchase the products that the factories are making. Willingness to spend is influenced by self-confidence that people feel secure enough to move; if they fear they may lose their job.

In September, when coronavirus cases rose again, consumption fell.

“With the health situation unlikely to improve in the short term, we expect the recovery to slow again in the coming weeks,” concluded the report, which was written by Moritz Degler, a senior economist at Oxford Economics.

But the rapidly deteriorating economic outlook forced Mr. Sunak to return to the well. On Friday, in anticipation of tighter limits for businesses, he announced a new layoff program that would cover two thirds of the salaries of companies that have to close due to the rapid increase in virus cases and which would also increase subsidies. The measures could be particularly significant in industrial areas in the north of England, where a wave of electoral support for the Conservative Party in last year’s elections helped keep Mr Johnson in office.

Fears of declining fortunes in Britain have been amplified by the possibility that the nation could exit the European Union at the end of the year – completing the tortuous Brexit process – in the absence of a deal governing future trade. This would risk killing the workplace chaos, especially in ports.

Across the Channel, the fall has led to awareness that complex obstacles remain before the European Union relief fund can be administered, limiting prospects in the worst-hit countries such as Spain and Italy.

Spanish Prime Minister Pedro Sánchez on Wednesday announced a stimulus spending plan worth 72 billion euros (85 billion dollars), with four-fifths of the money planned for the European fund.

Spain may have to wait for that money. The fund is expected to be operational by January, but it will almost certainly face delays as European Union members discuss conditions on its distribution, in particular rules aimed at compelling Hungary and Poland to abide by the bloc’s democratic norms.

Source link