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April 29, 2020

Will the first be the last? Virus edition

One of the biggest mistakes we can all make right now is trying to arrive at definite conclusions about the virus and its spread. Some countries have clearly handled the early phase better than others. Germany has one of the best health services in the world, and was relatively better prepared. But Germany was also lucky in that the crisis hit the country a little later, and initially mainly among younger people. But, despite the very low rate of hospital admissions and deaths compared to other European countries, it may be too early to declare a policy victory. We are seeing more and more countries that did well initially, but where the virus is spreading rapidly right now, like Japan and Russia. And there are also reports of a second wave of mass outbreaks in China.

As Germany prepares to lift its lockdown, the head of the government-owned Robert Koch Institute said that the R0 rate is now estimated to have risen back to 1. We agree with the assessment of its president, Lothar Wieler, that the R0 is not in itself a clear indicator of what is likely to happen. We noted gullible journalists gushing over Angela Merkel’s scientific precision when she explained the impact of different levels of R0 on hospital capacity. This is pseudo-scientific bunk. R0 is a model estimate. We do not observe it in real time. Merkel suggested a determinacy that simply does not exist.

Where we agree with her is her caution. In Germany, pressure to lift the lockdown is coming from the two most promising CDU leadership contenders, Friedrich Merz and Armin Laschet. Laschet in particular has been out campaigning for lifting the lockdown, placing himself on the opposite side of Merkel. Plans are now at an advanced stage to allow football games - without visitors - to resume in two weeks. With all the paraphernalia this will still involve several hundred people including journalists, doctors, and support and security staff. Once you set a precedent here, it may be harder to stop other sectors demanding the same rights.

As historians are reminding us, previous episodes of pandemics usually occurred in two or sometimes three waves, of which the second was often the most lethal. We don’t know whether this will be so this time. There will be no vaccination ahead of a second wave, but it is possible that one or several drugs currently being tested might reduce the death toll. Until we have more information, however, we should treat the consequences of a second wave seriously, especially since we are unlikely to revert to a total lockdown for a second time.

We noted an interesting report on the role played by large gatherings. The Telegraph reports this morning three UK sporting events can be statistically linked to a spike in death rates: the Cheltenham festival, a horse racing junket; the Liverpool-Atlético football game; and the Manchester derby. A regional analysis of death rates suggests a clear association between those events and a spike in subsequent deaths in nearby local hospitals, compared to hospitals further away from these events. Those three events were held between March 8 and 13, ahead of the government lockdown. Data from Imperial College suggest that mass gatherings constitute the biggest factor in the spread of the virus, with an impact twice as large as that of schools.

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April 29, 2020

Don't hurry your exit strategy

Entering into the lockdown is one thing, coming out quite another. Decisiveness and speed were important at the beginning. Slovakia fared better than France or Spain as suggested by the graph below. 

But what about once the lockdown is lifted? Will we see a rise in cases? What about the second wave? As we wrote above, it is too early to draw any conclusions. All we can observe is that countries differ in their exit strategies, both in the timing and the criteria. France and Spain just published staggered exit strategies. There will be allowances for specific sectors and schools, with the aim to reach a new normal by June.

France is lifting the lockdown as of May 11, but only gradually. Some regions might remain under strict lockdown depending on the local number of new cases, as well as on the capacity for testing and receiving patients in hospital. Those will be announced on May 7. As for the other regions with a green light, shops can open but not cafés or restaurants. Transport is to resume with up to 70% of capacity, people are allowed to travel but only within 100km of their homes, pre-schools and elementary schools will be open, with parents’ consent, but class size remain limited to 15. Middle schools in districts with milder outbreaks may be allowed to reopen from 18 May, and high schools at the end of the month. Meetings with less than ten are permitted. Remote work is encouraged to continue for another three weeks, as well as staggered working hours to avoid rush hours on transport. The partial unemployment scheme remains available until June 1. Édouard Philippe promised masks will be available for everyone, as well as the capacity to test at least 700,000 per week. The implementation of this national strategy is relying on a cooperation with local prefects and mayors.

For Spain, Pedro Sánchez presented a province-based exit plan to start May 10. The plan has three phases lasting at least two weeks each. Phase one allows restaurants to serve outdoors and hotels to open as long as they do not exceed one third of their capacity. Phase two will extend the one third rule to indoor dining areas, cinemas, theatres and exhibitions. The third phase would relax the one-third rule but insist on continued social distancing before the country returns to the new normal. That would still require a stop to the epidemic spread. Firms will have to protect vulnerable employees and stagger working hours. Public venues will be able to operate with limited occupancy ranging from one third to one half.

Whether or not regions with strong and long lockdowns will perform worse economically post-pandemic is another debate. An MIT study published on March 31 found that in the last pandemic to take the world by storm, the 1918-19 Spanish flu, US cities where lockdowns and social distancing lasted longest performed better economically after the disease had run its course. There is more that needs to be understood about the underlying causes and how relevant that is to today. The only caution we can draw from this is that pitting public health against economic activity might not be such a straightforward trade-off after all.

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