EUROPEAN ECONOMIES: DOUBLE DIGITS DOWN


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The economies of Austria, France, Germany, Italy, Spain, Switzerland, and the UK will contract by more than 10 percent if Europe’s economic shutdown lasts two months or longer, according to a new study by the ifo Institute.

  • Austria’s losses over two months of the shutdown are figured at €34 to €57 billion and a loss of 8 to 14 points from GDP. Add an additional month of virus-caused economic paralysis and the damage rises to €47 to €83 billion and 12 to 21 points are erased from GDP.
  • In France, two lost months of usual productivity would steal €176 to €298 billion and 7 to 12 points from GDP; a third month would swell the losses to €247 to €436 billion and a 10- to 18-point contraction in the economy this year.
  • Italy’s losses over a two-month halt could cost the country as much as €234 billion and cut 8 to 13 percent off its GDP. A third month of paralysis could erase €324 billion in productivity and cause the economy to shrink by 11 to 19 percent.
  • Two months of lost economic activity in Spain will rob the country of between €101 and €171 billion in value, cutting GDP by 8 to 14 percent. A third month of malaise would grow the losses to between €141 and €250 billion, equivalent to shaving 11 to 20 points off GDP.
  • The Swiss economy will lose €49 to €81 billion over two months, translating to an 8- to 13-point GDP loss; an additional month costs €69 to €119 billion and 11 to 19 GDP points.
  • Two months’ partial shutdown will lose the U.K. up to £328 billion, shrinking the economy by 7.7 to 13 percent; extending the closure to a third month brings losses to as much as £480 billion, costing 10.7 to 19 percent in economic activity.
  • For Germany, Europe’s biggest economy, two months of crippled productivity totals €255 to €495 lost, or a 7- to 11-point economic contraction. An additional month shut down brings the losses to €354 to €729 billion, whacking 10 to 20 percent from GDP. The study’s best-case scenario sees a 40-percent economic contraction for two months, recovering to a 20-percent contraction in the third, and returning to full productivity in the fourth – and that’s the best possible outcome, the study emphasizes.

TRENDPOST: Remember, the European economy, which grew 0.1 percent in the last quarter of 2019, was already in contraction before politicians began shutting down nation’s economies in March of this year.
Consider what that scenario means for Europe as a whole. A 40-percent economic contraction, even for two months, means millions of lost paychecks, hundreds of billions of euros of new government debt, and more desperate and risky schemes by central banks to put legs back under national economies.
 The financial turmoil won’t count the human anguish that will result: more crime, suicides, family abuse, divorces, anxiety, and depression. The human toll alone will have additional ripples throughout national economies through greater demands on social services and lost productivity.
England’s Meal Delivery Services Lose Business
Contrary to initial expectations, the business boost that British meal delivery services such as GrubHub and Deliveroo expected from the national lockdown has failed to materialize.
Analysts cite consumers’ fears of contact with strangers coming to their doors. Also, major restaurant chains such as McDonald’s, Nando’s, and Wagamama have closed stores, leaving delivery services with nothing to deliver.
In addition, people who have been laid off are less able to afford restaurant meals. The restaurants claimed fears for workers’ health forced the closures; but many eateries found that sales were too sparse to justify staying open.
During the third week of March, deliveries fell by as much as two-thirds, according to one analyst.
Deliveroo has been awaiting an influx of hundreds of millions of investment dollars from Amazon, but that transaction is on hold. “Deliveroo cannot afford this uncertainty,” said one unnamed person with inside knowledge of regulators’ review of the deal. “The company needs money fast.”
Deliveroo and competitors Uber Eats and Just Eat have launched advertising campaigns to draw business.
 

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