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April 03, 2020

After medical concerns, economic concerns take centre stage in Greece

What economic fallout is to expect from Covid-19? It depends on how long the lock-down lasts and how quick supply chains recover. Germany just lifted its Covid-19 work ban for seasonal workers. This will allow farmers to bring in 80,000 workers to assure the harvest, starting with the white asparagus season. Without the help of those seasonal workers, crop would go to waste and there would be food shortages. Economic concerns are beginning to make their way to the front line of political decision-making.

The lock-down brings the tourism sector to a standstill. Even if the situation is under control by June, air connections will need time to be re-established and it will take even longer for people to regain confidence and travel for leisure.

Transport is another sector hugely affected by global trade drying up. Shipping transport took a hit when the first factories closed in China. Lorries and their drivers returned to their home countries. This will take time to come back to normal. As EU countries are on different points in the pandemic curve, supply chains will remain affected even if the home country re-emerges from the lock-down earlier than others.

The closest experience of an economic meltdown of this magnitude in recent history is Greece. The country experienced a near standstill of its economy in 2010-2012, under the first bailout programme. The Greek government tried to close the fiscal deficit by €36bn or 15% of GDP, with an ensuing contraction of the economy by 9% yoy. The big difference is that 2010-2012 was a country-specific crisis while this pandemic is a global crisis that hits both external demand and internal consumption. 

Macropolis uses the 2010-2012 crisis to look at what to expect from the present crisis in Greece. The two big revenue generators are transport and tourism. Given the experience of the last crisis, they expect a fall of more than 30% in transport receipts. The 2018 data also suggests that Greece is at risk of losing €17bn if tourists stay home this summer. On the domestic front, Macropolis expects a double-digit fall in consumption by households under lock-down. They have an even grimmer view on investment, which could be a third lower, similar to the 2010-2012 crisis. About 90% of all Greek businesses are currently under some form of support, covering 2m of employees and self-employed, which represents more than 50% of people in employment. Public spending is thus compensating partially for the private-sector contraction. Even if one assumes that after two quarters of massive contraction the Greek economy will recover in the third quarter, the country is bracing for an economic slowdown this year similar to the 9% contraction in 2011. This would be the best case scenario. Macropolis' data comparison suggests that it could easily be worse.

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April 03, 2020

New momentum to exclude Fidesz from the EPP

Was Victor Orbàn's emergency law the final straw for the EPP to exclude his party from its ranks? Fidesz is suspended from the group, but still there was no majority to exclude the party in February. The suspension was prolonged until 2021. However, after Orbán's latest power grab through an emergency law, allowing him to rule by decree for an unlimited time and imposing prison sentences for misinformation, there is a new momentum within the group. Not only did the list of exclusion advocates grow, but there is also a shift among German conservatives inclulding in particular the CSU, a long time defender and even admirer of Orbán, writes the FAZ.

Thirteen centre-right leaders called on Donald Tusk to expel Fidesz from the EPP's ranks in a letter yesterday. Those include all countries advocating for an exclusion already last year:  Belgium, Denmark, Finland, Greece, Lithuania, Luxembourg, the Netherlands, Norway, and Sweden. New to the list are the Czech Republic and Slovakia.

France and Germany as well as other central and eastern European countries are not among the signatories. The FAZ, though, sees early signs that there could be a shift amongst conservatives in Germany. For Markus Ferber, MEP for the CSU, Orbán has passed his Rubicon by suspending parliament for an unlimited time. As president of the CSU’s Hanns Seidel foundation, he is now considering withdrawing the Franz-Josef Strauss price Orbán received in 2001 for his contributions to bringing down the iron curtain. Ferber did not back the call to exclude Fidesz from the EPP last year. This year he is calling on the European Commission and the Council to vet Orbán's new emergency law, with a view towards an Art 7 procedure that could result in Hungary's exclusion. But exclusion requires unanimity. We see no way this is going to happen. It remains a name-and-shame showcase. But there is nothing to stop the EPP to decide for itself whether or not it wants to exclude Fidesz.

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April 03, 2020

The Swedish experiment

The term Swedish Experiment used to refer to the country’s choice of an idiosyncratic socio-economic model after the second world war. It has now taken on an entirely new meaning. We are currently witnessing a fascinating real-time experiment of two contrasting corona-virus strategies. The modern Swedish experiment consists of minimal social distancing measures, without lock-down. Even the ski resorts are still open.

The Swedish public still supports Ste­fan Löf­ven, the prime minister, but some opposition is building up. There seems to be a majority in favour of closing at least the ski resorts. The media are generally supportive of Löf­ven, but the editor of Dagen Nyheter has raised objections. A list of Swedish scientists, including the head of the Nobel Foundation, published a letter of protest against the government's policy. 

Tom Britton, a mathematical statistician at Stockholm University who specialises on the spread of infectious diseases, believes that 1m out of 10m Swedes may already be infected by now, compared with an official number of just over 5000 cases. That number could rise to 5m by the end of the month. Under his calculations, end-April will be the moment when the Swedish hospital system would be its peak load from the virus. He fears that Sweden is underestimating the avalanche of cases that might come towards the end of the month.

The number of deaths attributed to Covid-19 in Sweden has risen to over 300. On the metric of deaths per million people, Sweden is still better off than the UK and several continental European countries, but it ranks highest amongst the Nordic states.

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