The second wave of epidemic hits European economic recovery

The second wave of epidemics in Europe is surging. The World Health Organization reports that the new infections in Europe each week are setting the highest record since the outbreak began at the beginning of the year.

Recently, France, Italy, Poland, as well as the European anti-epidemic “top students” in Germany in the early stages of new cases have reached a single-day high. Unlike the first wave of the epidemic in the first half of the year, this time the momentum is even stronger, not only hitting the hardest-hit areas of the first wave, but also in the recent single-day number of newly confirmed cases in Central and Eastern European countries where the epidemic has been relatively slow, such as Romania, Poland, and the Czech Republic. Reach four digits. The “traffic light” map of the new crown epidemic in Europe published by the European Center for Disease Control and Prevention (ECDC) fully shows this ever-expanding crisis.

The economic outlook has worsened

As worrisome as the increasingly severe epidemic is the prospects of the European economy, it can be described as worse.

Affected by the second wave of the epidemic, the recovery of the European economy is slowing down. European Central Bank Management Committee Rennes said that the European economic rebound was weaker than expected, and the recovery pattern looked like a “truncated square root.” Relevant institutions and countries have once again lowered the economic growth rate this year. The economies of Spain, Italy, France and other countries will shrink by 12.6%, 9%, and 10% respectively. According to the autumn report jointly released by the five major German economic research institutes recently, even Germany, known as the “locomotive of the European economy,” will not only decline by 5.4% this year, but also grow by only 4.2% next year, which is worse than the spring report forecast.

Based on this prediction, first, as the governments of European countries such as France, Germany, Spain, and Italy are forced to strengthen restrictive policies again, European economic activities tend to be sluggish. In August and September, the Eurozone Comprehensive Purchasing Managers Index (PMI) continued to decline from July, and the service industry PMI was lower than expected.

Second, at the same time, the unemployment rate in Europe is gradually rising compared to the previous period. If companies cannot effectively resume work and production, many companies that rely on relief for maintenance will have to lay off employees or even go bankrupt, and the unemployment problem will become more prominent.

Third, financial stability in the Eurozone is also worrying. European Central Bank President Lagarde said that due to the soaring debt levels, financial stability risks in the euro zone are rising. With the deterioration of corporate solvency, the European financial system will usher in a continuous increase in non-performing loans.

Fourth, in the early stage of the fight against the epidemic, EU member states were allowed to break through the fiscal deficit limit, and successively introduced large-scale deficit fiscal policies to expand fiscal expenditures to protect enterprises and people’s livelihoods, which not only quickly pushed up the level of government debt, but also the public debt of many European governments. Historical high point. For example, France’s fiscal deficit this year will exceed 10.2%, and public debt will reach a record-breaking 117.5%. And also deeply “embedded” for future recovery.

Policy tools almost bottomed out

In the face of the raging epidemic and severe economic situation again, the European Union appears to be a little “exhausted and insufficient”, and its policy toolbox is already shy.

The EU reached a “recovery fund” of 750 billion euros, including 390 billion euros in grants, which was reached through difficult negotiations. The specific amount allocation and implementation details of each country are still “wrapping” and may not be until 2021. Make the first expenditure, far can not quench the thirst. The ensuing second wave of the epidemic has undoubtedly doubled the demand for emergency relief and created a funding gap.

The European Central Bank also lacks “weapons”. From July to September, the European Central Bank kept its monetary policy unchanged. Taking into account the realities of negative interest rates and the unprecedented scale of QE measures that have been implemented, its policy space is also very limited.

The EU is also subject to a series of external environmental constraints. On the one hand, after Brexit, negotiations on the economic and trade relations between the UK and Europe have not yet appeared, and the two sides have refused to compromise on issues such as fair competition; the original major economic and trade partner, the United States, is out of control, and the US and Europe Trade frictions remain, and issues such as aviation subsidies and digital taxes are full of contradictions. On the other hand, the dysfunctional and fragmented international economic governance system, coupled with the unpredictable impact of the global epidemic on the world economy, have worsened the prospects for European economic recovery.

People are lax

Fighting the epidemic and restoring the economy are not only the responsibility of the government, but also the cooperation of the European people, and the people are generally tired and resisted.

The second outbreak of the epidemic itself has nothing to do with the people’s lax attitude. With the second attack of the epidemic intensified, the debate within European countries about the need to lock down cities and ban feet has revived. In addition to its possible impact on the economic recovery, I am afraid that the people’s mentality of relaxation, fatigue, numbness and resistance, as well as psychological pressure and The endurance is even more noticeable.

First, in terms of mentality, the people underestimated the second wave of the epidemic, and were more resistant to restrictive measures. As French Prime Minister Caste said, too many people did not realize that “the second wave (epidemic) has arrived” and ignored the epidemic. It is not uncommon for people to act arbitrarily and even engage in street politics.

Second, on the practical level, wage cuts, unemployment, work stoppages, and foot bans have led to lower incomes and difficult lives, which are eroding the trust of European people in the government. With the epidemic, the trust dividend of the “war government” is gradually receding. In France, the latest data from Elabe, a polling agency, shows that only 35% of respondents trust the government to effectively fight the new crown, and 73% said they are worried about the development of the epidemic; in the Netherlands, the support rate for the government’s response has recently increased from 75% It fell to 65%; in the UK, the public’s support for the ruling Conservative Party went from 26 percentage points ahead of the opposition Labour Party at the beginning of the outbreak at the end of March to a recent reversal and backwardness. All these, the economic and social problems caused by the epidemic will severely test the economic recovery and social stability in Europe, and may even lead to social unrest. This raises new questions about new governance and governance capabilities for European governments and the leadership of the European Union.

In the short term, the EU and its member states can learn from the successful experience of other countries in fighting the epidemic, gain public understanding and support, assess the situation, strengthen epidemic control, promote vaccine research and development, comprehensively implement economic and social response policies, and increase efforts to protect people’s livelihood and stabilize society.

In the long run, powerful, integrated, and organically integrated economic and social forces are the trump card to deal with internal and external challenges in the era of globalization such as the new crown epidemic. Europe also needs to solve the comprehensive problems exposed by the impact of the epidemic, such as the formulation of relevant economic countermeasures, the coordination of intervention tools, the guidance of social customs, the cultivation of public self-discipline, the enhancement of social mobilization capabilities, and the coordination between local, national and EU. The fight against the epidemic in Europe requires a concerted effort to “cure both the symptoms and the root causes.”