Governments have a brutal message to deliver: The coronavirus lockdown cannot go on too long or the consequences of economic meltdown could be even more deadly than the disease.
As countries across the world announce lockdowns and multibillion-euro bailouts, they know these can only offer short-term fixes. National leaders have one eye squarely on the calendar and are trying to calculate when they are going to have to tell people to get back to work, even if that will reignite infections and high death tolls.
It is French President Emmanuel Macron who has most starkly expressed the challenges of balancing measures like self-isolation and social distancing against the imperative to keep the economy running.
“It is impossible to live — even in self-isolation — and to cure people, if we do not continue the economic activity that, quite simply, permits us to live in this country,” he said while chairing an “economy task force” dealing with the outbreak.
Macron is also the most prominent voice to warn people that a vaccine is not imminent, and probably wont arrive until the end of 2021. The message is clear: It wont be possible for people to stay at home until then.
“Its a very difficult balancing act. Its not clear that any government has a credible exit strategy” — Mujtaba Rahman, Europe director at EurasiaGroup
Its an excruciating trade-off. On the one hand, social-distancing measures can minimize contagion and death tolls, but a deep economic depression will sap the government revenues that pay for public health services and utilities. Countries with uncollected waste, failing water supplies and intermittent power could prove as dangerous as the virus. The problem is that, as soon as the lockdowns end, the infections and deaths will soar again.
“Its a very difficult balancing act,” said Mujtaba Rahman, Europe director at EurasiaGroup, a political risk consultancy firm. “Its not clear that any government has a credible exit strategy.”
Infections will resurge
Macron was the first EU leader to admit that nobody knows “how long well have to keep this reduction of social contacts,” he said Thursday.
Thats because the extreme social distancing seen in Italy, Spain, France, Belgium and other EU countries will not make the pandemic disappear. It can only slow it in an attempt to prevent hospitals from being overwhelmed.
Research from Imperial College London shows that epidemiologists and doctors believe even the most radical social-distancing measures can only provide temporary respite.
As soon as governments lift the measures, as China is doing now to save its economy, cases will explode again, said Christian Drosten, a German virologist who developed the coronavirus test and has advised the German government on containing the disease.
“As a doctor trained in infectious disease epidemiology, I can only say the same thing that all my colleagues say too,” he said in a podcast. “With the resurgence of public life, infections will resurge as well.”
Experts agree that a vaccine will only be available in one year or even 18 months.
But maintaining social-distancing for that duration would be untenable, and likely result in a global depression.
The OECD forecasts global growth will slow down to 2.4 percent in 2020 due to the pandemic, down from the 2.9 percent forecast last winter. Under a “longer lasting and more intensive coronavirus outbreak” spreading through the U.S. and Europe, global growth would drop to 1.5 percent. A study by Munich-based Ifo Institute published Monday estimates economic losses in Germany could range from from 7.2 percent of GDP for a two-month period of disruption to 20.6 percent under a worst-case scenario for a three-month outage.
China has chosen to give up up on the most radical forms of containment and prioritize economic growth in the coming months.
“Policymakers are actively shutting down large economies. Thats why the extent of the recession were looking at in the eurozone could be 10 percent of GDP, maybe even more,” said Rahman.
At some point, it may simply become untenable to keep up mass restrictions.
In Modena, Italy, nine detainees lost their lives in a prison riot, some due to overdose, shortly after lockdown measures were imposed in the province. The revolts spread to other prisons in Venice, Milan, Bologna, Rome, Rieti, Naples, Meli, Palermo. Across Italy, the army is now being deployed to police the social-distancing measures.
China has chosen to give up up on the most radical forms of containment and prioritize economic growth in the coming months.
“What is happening in China now … is that businesses are getting back to work,” Drosten said. “We have seen that the quarantine measures have caused so much economic pain that they have to be retracted/cut back.”
“What we are going to see now … is that in the coming weeks and months its going to explode again in China,” he added.
He cautioned that Beijing would likely try to keep any new surge under wraps. “We will not see any more reliable case reports from China in the near future,” he said, as Beijing “wants the problem to be solved now in China. But of course it wont be solved.”
What now?
For Europe, this means that governments will soon need to decide how to proceed — and to communicate that to their population.
In countries where the lockdowns are just beginning, the question of “what now” is being answered in a piecemeal manner.
France is sending out a double message. Even as the government orders people to stay home, it is already issuing calls to go back to work and encouraging businesses to issue a one-off payment of up to €1,000 to those who do.
“I invite all the federations, all the large companies … to pay this premium of €1,000 euros totally tax-free to their employees,” Economy Minister Bruno Le Maire said Friday.
In Italy, the worst-hit country, Prime Minister Giuseppe Conte announced the lockdown — planned to end on March 25 — will be extended, but didnt give an end-date. So far, production hasnt ground to a halt. After spontaneous strikes mushroomed in factories and shipyards as workers feared contagion, trade unions negotiated a safety protocol for workers with the government and employers.
But the question has yet to be resolved. On Sunday the Italian government issued a new decree effective from today putting a halt to all “nonessential” economic activities, to further crack down on the spread of the virus. In response, trade unions are threatening a general strike as the list of permitted activities includes producing tractors and manufacturing tobacco products, activities they argue should not be considered essential.
In the U.K., Prime Minister Boris Johnson is playing delaying tactics.
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