The European Union Is Facing Its Worst Recession Ever. Watch Out, World

https://www.nytimes.com/2020/05/06/business/coronavirus-europe-reopening-recession.html

by elsewhen • 6 years ago

38 55 6 years ago

nytimes.com

downerending• 6 years ago

Suspect they'll be in good company.

notechback• 6 years ago

Original report and PR:

https://ec.europa.eu/commission/presscorner/detail/en/ip_20_...

littlestymaar2• 6 years ago

I don't really understand all the fear around “the current recession”: so far the countries have been locked down, which means almost freezing the economies for 2 month (in France, more than half of the private sector employees were idle, and paid by the government to stay home). Indeed as a result the 12-month GDP including this period is lower, but that doesn't really mean anything: it's just what you get when you average a normal period with a frozen one.

Of course I'am worried about what's next, because when we are reopening not everything will reopened (tourism, restaurants, and many things are going to stay closed for a looong time) and then we will see long-term damage. But the current figures just sounds like a calculation artifact to me.

Edit: in fact, I'm even worried that the fear around the “artificial recession” is going to create a real one: many countries are currently reopening because they are afraid of the recession, but it's way too early so they won't reopen completely and they may even face a “second wave” which could probably have been avoided if the lockdown was sustained enough to eradicate the disease in the country.

pjmlp2• 6 years ago

Everyone that isn't able to work from home, and lives on the edge of their economies really understands it.

littlestymaar2• 6 years ago

In the US I guess, but in France and AFAIK in most Europe, people are being paid even when they can't work (not 100% of their salaries, but it's still 3/4 of it here in France + benefits for the lower incomes).

I this kind of crisis, what's remain of the welfare state is immensely valuable, too bad many American citizens have been brainwashed by cold war propaganda and consider this as socialism…

pinkfoot• 6 years ago

… because the the rest of us lack empathy and are too dumb to be enable to imagine anything that we don't experience ourselves?

mns• 6 years ago

I think, just like some comments below mention, it's hard to grasp this when you are not affected by this. Most of the people here have savings or work in fields that are still ok, but there is more to the world than this. I work in a company which now had its best quarter ever, thanks to this situation, as we're focused on things that became all of the sudden very important. I have colleagues that are working remotely, because they just decided that it's a better financial option for them to go back to their home countries, instead of working in a more expensive one, where we are based. They think that everything is fine, were joking that they don't care, while in the same time telling stories how in their home town (Eastern European legacy) the only 2 factories that employed most of the active population are closed and people have a very low income now for over 2 months and it appears that the social impact and the pressure of this might not have good results, so now all of the sudden, when crime rates go up and people are becoming more and more desperate, it's starting to creep on them.

andarleen2• 6 years ago

That’s odd, which east european country is that? Most east EU nations have very low covid numbers, and people are still allowed to work. Some factories are indeed closed, but in countries like Romania for instance, where people living on the country still farm chicken and pigs, and those in the city have relatives doing it, food is not really an issue. Also there is a rent freeze, banks suspended mortgages and utilities are delayed. Kicking someone out for not paying rent is also illegal during the pandemic. From what I gather Italy, France and others already have social tensions due to the virus, but haven’t heard about similar issues in east europe.

PeterStuer• 6 years ago

Capitalism comes with an embedded growth obligation. At the meta/aggregate level we have already consumed / are consuming the future and our current efforts are to fill the gap with interest.

So unless the top of the pyramid decides we can suspend capitalism for a few months, all the dominoes keep cascading growth obligations downstream and if you can't meet them you are pushed over the edge of the cliff.

whb07• 6 years ago

Capitalism isn’t embedded with anything. It’s human desire that is endless and never satisfied.

It’s not capitalism that has Leonardo DiCaprio date multitudes of models in their 20s. It’s not capitalism when Soviet citizens would line up outside of the better armory factories to get their allotment of cutlery.

andarleen2• 6 years ago

Europe has already been vulnerable to populism, and this pandemic and the recession to follow will be heavily exploited by far right populists. Also the fact that the EU itself was quite useless through-ought the process will make it an easy target. It will be a difficult few years from this perspective and potentially have geopolitical consequences.

mcv• 6 years ago

In Netherland, restaurants and cafes can reopen soon, but it has to be by reservation, so the owner can manage occupancy, and no more than 30 people can be inside, including staff. Of course everybody will have to keep 1.5 m distance from each other.

I also know of one restaurant in Amsterdam that is testing a setup that will have individual glass cabins for each table[0]. Many restaurants in Amsterdam, including Michelin-star restaurants, have switched to delivery. We've had some amazing delivery food in the past weeks (though the best required quite a bit of preparation at home).

Simply closing everything down is not sustainable; we need to figure out how to live with this new situation.

[0] https://dutchreview.com/coronavirus/1-5m-society-amsterdam-r...

conistonwater• 6 years ago

Try to compare this sort of logic with what we already know happened with the last financial crisis. Before that crisis, banks lent out a lot of dud loans and people bought too many expensive houses. A lot of the people who ended up being unemployed afterwards were not the people who made bad financial decisions, they were just a regular part of the economy, and the damage lasted for many years. I think if you tried to carry through with the "average of normal + lockdown" logic for the financial crisis, you'd get an unrealistic result: you'd expect the economy to be back to normal fairly soon because all those people who could be working the way they were before the crisis could just show up to work (they can do that work just as well as they could before the crisis, obviously). None of this has anything to do with "fear", this is just what recessions look like.

Just because the system could go back to normal in no way shows that it will, or even that it is likely to, and that's a fundamental feature of recessions. It's like the system as a whole has multiple equilibriums, and which equilibrium it ends up in depends on the history leading up to it: the "average of normal + lockdown" only tries to show that a desirable equilibrium exists and vaguely implies that that's the equilibrium it will end up in. My understanding is that conventional economics and past experience both say that it is far more likely that it won't and that the recession will be as genuine as any other.

fallingfrog• 6 years ago

Take a look at this graph of us unemployment over time.

https://static01.nyt.com/images/2020/04/03/upshot/03up-unemp...

Unemployment always goes up quickly, then takes time to go back down. It’s like any other injury; the damage happens fast, healing takes time.

Given the damage that has already occurred, and the rate that jobs can be added back to the economy, I’d guess that it will be something like 10 years before unemployment goes back down to pre-corona levels. If it just jumps back as soon as the lockdown is lifted, it will be the first time in history that has ever happened.

zaro• 6 years ago

And the rest of the world not?

CryptoPunk8• 6 years ago

Every percentage drop in per capita GDP is associated with a loss in life expectancy.

The response to the coronavirus pandemic, of mandatory lockdowns of nearly the entire population, for several weeks, may prove to be one of the most egregious cases of self-inflicted social harm the world has ever seen.

tonyedgecombe2• 6 years ago

It's hard to see any other course of action when we saw what was happening in Northern Italy. In fact if anything I would say most Western countries didn't lock down early or hard enough.

Countries that ease the lockdown before they have a handle on the virus are in for a lot of pain further down the road. Probably more economic damage as well.

LastZactionHero2• 6 years ago

As an example, 9 million people die each year due to hunger or hunger-related issues, many of them children. 135 million face food insecurity. Due to lockdowns and recession, the World Food Program estimates the toll will double this year. And hunger is just one cause of death that a recession can lead to (suicides, substance abuse, etc).

Lockdowns might save lives, and I can't blame public health officials for protecting their community, but I personally fear more lives will be lost due to economic costs. They just might be poorer, quieter lives. And while death is, of course, final, suffering in life should count for something too.

https://www.wfp.org/news/covid-19-will-double-number-people-...

ramblerman2• 6 years ago

Those are not opposing viewpoints though.

Given what we saw in North Italy it would have been foolish not to go to lockdown imo.

But with hindsight we might still assess it was the wrong measure.

CryptoPunk8• 6 years ago

The other course of action was what South Korea did: mass testing and contact tracing. South Korea didn't lock down the entire society.

As for getting a handle on the virus, it's entirely possible that only herd immunity will do that, and the countries delaying that happening with lockdowns are just delaying the inevitable while incurring unnecessary economic damage in the process.

Isinlor4• 6 years ago

It's false choice. This virus kills 0.5 to 1% of infected people across population. It can infect more than 50% of the population. Everyone would know somebody who died because of the virus. The economy can not function when people are dying left and right. For example, Sweden will not be ok economically.

We have already 0.1 million dead.

EU has 445 million people, so more than 1 million can still die 445(1000^2)0.5*0.5%

There is also question about long term health of people who got COVID-19. Based on Japanese study on Grand Princess passengers [0] and some 6 divers [1] all with mild cases from Germany around 50 to 80% of people seem to have damage to the lungs visible on CT scans after mild symptomatic or even asymptomatic infection. Two of the divers had significant oxygen deficiency when doing physical exercise after 5-6 weeks of recovery. The guess of the doctor who was inspecting them is that this is permanent damage that may take years to recover if ever.

[0] https://pubs.rsna.org/doi/10.1148/ryct.2020200110

[1] https://translate.google.com/translate?sl=auto&tl=en&u=https...

llarsson2• 6 years ago

If you mean in the context of Swedish deaths, those are 2,900 or so deaths, not 0.1 million.

Edit: I interpreted the number to be in the context of Sweden, as it was mentioned just in the sentence prior. Reply updated to make that clear.

gnusty_gnurc• 6 years ago

This virus kills 0.5 to 1% of infected people across population. It can infect more than 50% of the population. Everyone would know somebody who died because of the virus. The economy can not function when people are dying left and right.

Doesn't around 0.8% of the population die each year normally? So at worst (everyone infected) we'd have a year or two where all-cause mortality roughly doubles (concentrated in people 65+ year olds)? That's a big increase and by no means easy to handle, but surely that shouldn't end or stop the economy like you're claiming.

CryptoPunk8• 6 years ago

The economy CAN function when people are dying left and right. It functions every year, with a huge percentage of the population suffering this sort of personal tragedy.

Of course, activity will decline even in the absence of a lockdown, but far less than if nearly the entire population is forced to shelter-at-home for an indeterminant length of time (all the while failing to build herd immunity).

ramblerman2• 6 years ago

It's funny to see you downvoted into the light gray at the time of reading. I mean, You did say "may turn out to be".

It seems as with any partisan issue america jumps on, the party lines are quickly formed, and it's now black or white, you are either for or against.

Your nuance is not appreciated.

mytherin2• 6 years ago

I fail to see the nuance. The parent comment is not downvoted for partisan reasons, it is downvoted for stating that the lockdown is directly responsible for the economic issues as if that is obvious, when that is extremely questionable.

The virus is responsible for the economic issues. Lifting the government mandated lockdowns will not change the presence of the virus. Even if the government lifted the lockdown most people will still not consume like they did before. People will not fly like they did before, travel like they did before, eat out like they did before, etc until the root cause is gone.

The lockdown might very well be better for the economy in the long run because it means the root cause is gone sooner. Lifting the lockdown early (or not having a lockdown at all) means the virus will linger around for much longer which means the economy remains in shambles for longer.

You can force people to work, but you cannot force people to consume, and lack of consumption is the main cause of the current economic issues.

boudin• 6 years ago

The lockdown was a necessity for countries healthcare systems to cope with the amount of people requiring care. Not doing so would have been self-inflicted social harm too, not only for people requiring healthcare because of COVID-19 but also for people requiring healthcare from other diseases.

kalleboo• 6 years ago

They were a necessity in some places like NYC and parts of Europe, but in many other places, lockdown began before the virus spread there and the hospitals have been gaping empty while lockdown continues. The original tactic was "flatten the curve" to keep cases where the healthcare system could handle them, but that tactic has been changed to "get cases down to the level where we can test & trace down to zero". Sweden appears to be the only country sticking to the original flatten the curve plan, they've been keeping their R hovering around 1, staying about 20% under ICU capacity.

aaron695• 6 years ago

How about we call it what it is, a Depression.

And let people make the argument if "it's just a Recession Bro"

What time line do people expect for this to be "just a Recession"?

When do people expect business to stop being legally stopped from opening and people wanting to use them across the world. So when will all borders reopen for instance? Vaccines might be 2 years. So this is the best case, the world let's C19 run it's natural course.

Then after that, we will have to pull out of a global financial slump.

We have both a lack of financial confidence combined with a fear of a virus to deal with.

The European Union Is Facing Its Worst Recession Ever. Watch Out, World

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