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Europe’s economic center is once again suffering from the rapid spread of infection and severe restrictions. In Paris and eight other French cities, curfews will be introduced this weekend between 21 and 06. London is also tightening. Indoor contact will be prohibited.
In Germany, where the infection curve is rising from a lower level, the authorities are waiting. At the same time, voices within Merkel’s government want to tighten restrictions that have recently been introduced in Berlin.
All governments are now embarking on a complicated balancing act, to say the least: trying to stem the second wave of contagion while avoiding a recurrence of the spring economic crash.
We can not afford. This is the wording that has been echoed in European capitals in recent weeks.
“We cannot afford a second wave with the consequences we had this spring,” Chancellor Angela Merkel said this week. The German economy contracted by around 11 percent between January and June this year and has only begun to recover from the collapse.
France’s economy was hit even harder. President Emmanuel Macron said on Wednesday the goal now is to keep most of society going: “The economy needs it.”
Even a country like Finland, whose economy is among the best survivors of the spring outbreak and only declined by 5 percent, is determined to deal with the epidemic without draconian national measures.
“We cannot afford to close the company to run a deficit of 20 billion again,” Finance Minister Matti Vanhanen told Finnish Yle some time ago.
Perhaps immunity in the population now also plays a role.
Several things speak for themselves that economies can cope with a second wave better than the first.
An important factor is, of course, that the defense against the virus itself has been strengthened. Countries have better testing capacity, manage infection tracking faster, and know more about infection routes. Hopefully, it creates conditions for more precise measurements.
Spain, for example, seems to have seized its – until recently – explosive infection curve. Perhaps immunity in the population now also plays a role.
The fact that financial readiness has been increased also helps. Central banks are on the alert, prepared with massive crisis programs. It provides a kind of basic security in the financial markets, while at the same time supporting the overall economy.
Sweden did not have a total closure. Still, the economy was hit hard.
The authorities also have financial safety nets in place. It gives companies and employees a little more certainty.
Success in avoiding confinement is at the same time not everything. Sweden did not have a total closure. Still, the economy was hit hard.
The International Monetary Fund, IMF, claims in a new analysis that spontaneous behavioral changes actually affected people’s movement patterns more than directives from authorities during the spring outbreak. The increase in infection simply leads us to lock ourselves in. It reduces the economy.
Therefore, there is no simple balance between saving lives and saving the economy, says the IMF.
