#Press play to listen to this article
#Paul #Taylor, editor-in-chief of POLITICO, writes the #Europe #At #Large column.
PARIS – #Asked by #France #Inter radio to imagine what life would be like after the coronavirus, the dystopian #French novelist #Michel #Houellebecq evacuated the happy rhetoric about reconstruction and predicted “the same thing a little worse”.
#This could turn out to be one of the most optimistic scenarios for #Europe in 2021.
#Despite the arrival of the first coronavirus vaccines and the first disbursements from the EU’s large fat recovery fund, the continent is ready for another dose horribilis periodic lockdowns, restrictions on socialization and travel, growing business bankruptcies, rising unemployment, defaults and lingering economic uncertainty.
A last-minute trade deal between the UK and the EU averted a chaotic collapse when the #Brexit transition period expired at midnight on #December 31, but the EU economy is doomed to suffer start-up problems with new processes and the red band at the border of the channel. The #Christmas chaos when hundreds of trucks were stranded for days in #Kent after #France banned travel from #England to try to stop a new, rapidly spreading COVID-19 strain may not have been be just a taste.
#An economic rebound could also be delayed if large numbers of skeptical #Europeans refuse to be vaccinated, either because they do not trust their governments and official health advice, or because they believe that the #Misinformation has spread on social media warning of side effects or conspiracy theories. on #Big #Pharma’s bad intentions.
#Even if the vaccine rollout starts off smoothly, the recovery from #Europe’s biggest peacetime economic contraction is likely to be slow and uneven. #Vaccinating enough #Europeans to achieve widespread protection – sometimes known as herd immunity – will take most if not all of 2021, if possible.
#In some countries, like #France and #Poland, resistance to vaccination as measured in public opinion polls is so high that too few people can accept the vaccine to prevent the virus from continuing to spread. #Just imagine the impact if one or two patients die from complications after being vaccinated.
#Much of the devastating impact of COVID-19 on jobs, businesses and economic sectors such as aviation, hospitality, culture and recreation has yet to be fully felt because the programs of government support, state-guaranteed bridging loans, vacation pay and subsidized short-term work cushioned the initial impact.
These programs will expire or be cut in 2021, unless governments, which have rightly allowed their budget deficits and public debt to inflate, extend the costly measures until 2022. #Wealthy #Germany has pledged to do so with its flagship program of work in the short term, but countries under greater financial strain are bearing the cost and worrying that it is time to phase out these general systems.
#Yet, with a new, more virulent variant of the virus spreading from #England, we may not even have reached the halfway point of the pandemic. #Polish #Finance #Minister #Tadeusz #Kościński said last month that he expected a third wave of COVID-19 in #February and #March. #Many epidemiologists see no respite until summer 2021 at the earliest.
#Economists rightly fear a scarring effect of business failures and prolonged unemployment that depletes skills and discourages consumer spending as the pandemic continues.
#Many #Europeans have been racking up tax savings due to travel restrictions, working from home, and prolonged shutdowns of non-essential shops, restaurants and entertainment venues. The restarting economy is forcing consumers to go out and spend as soon as stores reopen, as many people have done in the spring and summer. #But uncertainty about jobs, health care and pensions, along with a general lack of confidence, can prevent any spending spree in the #New #Year.
#Moreover, the debate is sure to start soon on when and how to re-impose the suspended EU fiscal discipline and state aid rules.
#Political pressure to start tightening belts again in the eurozone may well be a factor in the #Dutch general election in #March and in the #German federal election in #October, especially if right-wing #Friedrich #Merz, a leadership fiscal hawk #Christian #Democrats leaving #Chancellor #Angela #Merkel in #January.
#When the pandemic struck, the EU quickly suspended fiscal rules forcing countries to cut their deficits to less than 3% of gross domestic product and reduce public debt every year until they hit the target. 60% of GDP. They will remain suspended for 2021, but what happens after that will likely be the subject of fierce debate.
#States like #Italy, #Spain, #France and #Belgium, not to mention #Greece, will have accumulated more than double the debt-to-GDP ratio allowed in 2021.
The #European #Central #Bank, the #European #Commission, the #Organization for #Economic #Co-operation and #Development, and the #International #Monetary #Fund all recommend that governments continue with stimulus spending through 2021, boost public investment, and not rush to tighten fiscal policy until production has returned to -COVID levels.
#But the policy could stand in the way of economic sense, as it did during the 2008-2014 financial crisis, when #Germany and its northern allies forced eurozone countries to withdraw measures too soon. recovery, imposing a synchronized austerity which plunged the EU into a double dip. recession.
#Much depends on whether the EU stimulus fund, first funded by pooled debt, can be disbursed quickly and efficiently, creating jobs in the green and digital sectors.
#Refurbishing #Europe’s aging building stock to improve energy efficiency is a labor-intensive project intended for a quick start. #But any delay or dispute over how countries spend the money could undermine public support for the EU.
#Not everyone is gloomy about the way out of this crisis. #Economic forecasters IHS #Markit forecast a robust global recovery in the second half of next year thanks to vaccine breakthroughs that could unleash pent-up demand.
“The rapid deployment of effective vaccines and reopening of economies are expected to gradually trigger a new wave of spending on travel and services, leading to robust growth at the end of 2021,” said #Sarah #Johnson, executive director of the global economy at IHS #Markit.
#Still, it is more optimistic for other parts of the world, notably #China, than for the EU, where production is not expected to return to pre-COVID levels before the end of 2022 or 2023.
#In the meantime, unemployment will rise and social and intergenerational disputes over who deserves protection, who pays COVID-19 debt and where the stimulus money goes are likely to dominate 2021 as the death toll continues to rise.
#Drive in 2022!