LONDON – Before the pandemic, traditional economies on opposite sides of the Atlantic were traditional. Europe – full of older people, intertwined with bickering over politics – looked stagnant. The United States, which is ruled by innovation and risk, seems to be growing faster.
However, this alignment has changed through conflicting approaches to the looming global crisis. Europe has generally expanded with the spread of the coronavirus, enabling many economies to reopen while protecting workers whose livelihoods have been threatened. The United States has become a symbol of ruthlessness and disagreement over a serious emergency that has raised growing concerns about the fate of jobs and nutrition.
On Friday, Europe released economic figures that were terrible on their faces. The 19 euro-sharing countries fell 12.1 percent from the previous quarter between April and June, the sharpest decline since 1995, when data were first collected. Spain fell by a staggering 18.5 percent and France, one of the eurozone’s largest economies, fell 13.8 percent. Italy decreased by 12.4 percent.
Europe emerged even worse than the United States, which had the worst three-month period in history the day before, down 9.5 percent in the second quarter.
But under the headlines, Europe was a promising sign of strength.
Germany has seen a decline in the number of unemployed. Surveys found evidence of growing confidence in the expansion of industrial production, while the euro continued to strengthen against the dollar as investment went to European markets – signs of improving sentiment.
These contrasting riches underscored the central truth about the pandemic, which killed more than 670,000 people worldwide: the virus itself is the most significant cause of economic pain. Governments that better manage its spread have gained more confidence from their citizens and investors, putting their economies in a better position to recover from the worst global downturn since the Great Depression.
“Economic recovery does not exist without a controlled health situation,” said Ángel Talavera, chief eurozone economist at Oxford Economics in London. “It’s not a choice between them.”
European confidence was supported by a pioneering agreement concluded in July within the European Union for the sale of bonds worth EUR 750 million (USD 892 million), which are jointly supported by its members. These funds will be used in the most affected countries, such as Italy and Spain.
The agreement has gone beyond years of opposition from neighboring northern European countries such as Germany and the Netherlands against the issuance of a common debt. They decided to put their taxpayers on the border to save their southern neighbors, such as Greece, while indulging in harsh stereotypes of Mediterranean enthusiasm. The hostility confirmed the feeling that Europe was only a union – criticism that was subdued.
The United States has spent more than Europe on programs to reduce the economic damage to the pandemic. However, most of the expenditures brought benefits to investors, which led to a significant recovery in the stock market. Unemployment unemployment benefits proved crucial because tens of millions of unemployed Americans could pay rent and buy food. However, Friday was due to pass, and there was little indication that Congress would expand them.
Europe’s experience has highlighted the benefits of its more generous social security schemes, including national healthcare systems.
Americans feel compelled to go to work, even in dangerous places such as meat-packing plants, and even when they are ill because many lack paid incapacity for work. However, they also feel pressured to avoid shops, restaurants and other crowded places of business, as millions of people do not have health insurance, making hospitalization a financial disaster.
“Europe has really benefited from the fact that this system, which is more controlled by social systems than the US,” said Kjersti Haugland, chief economist at DNB Markets Investment Bank in Oslo. “It keeps people less scared.”
The more promising situation in Europe is neither certain nor complex. Spain remains a serious problem as the spread of the virus threatens lives and livelihoods. Italy has emerged from a gloomy number of mass deaths into a chronic state of lingering economic problems. Britain’s tragic mishandling of the pandemic has shaken faith in the government.
If short-term factors appear to be more beneficial to European economies, longer-term forces may be more advantageous to the US due to a younger population and higher productivity.
The sense of European-American rivalry was evoked by a bomb attack by the nationalist American president, which turned the pandemic into a morbid opportunity to keep the score.
“There is a degree of victory,” said Peter Dixon, a global financial economist at Commerzbank in London. “People say, ‘Our economy has survived, we are doing well.’ “There are a number of Europeans Schadenfreude“If I may use that word, given everything Trump has said about the United States.”
So far, however, a moment of confidence in Europe is evident, most notably in Germany, the continent’s largest economy.
Although the German economy declined 10.1 percent from March to June – its worst decline in at least half a century – the number of unemployed people declined in July, in part due to government programs that subsidized illegal workers.
Surveys show that German managers, who are not inclined to solar optimism, expect future sales to return to pre-virus levels. This buoyancy translates directly into growth and encourages companies to employ additional employees.
Ziehl-Abegg, a manufacturer of ventilation systems for hospitals, factories and large buildings, recently launched an expansion worth EUR 16 million (USD 19 million) at a factory in southern Germany.
“If we wait for investment until the market recovers, it’s too late,” said Peter Fenkl, the company’s CEO. “Billions of dollars in the market are ready to invest and are just waiting for the signal to go off.”
According to FactSet, the euro has so far gained more than 5 percent against the dollar. European markets have attracted international money, which flows into so-called exchange-traded funds, which buy European stocks. The Stoxx 600 index, compiled from companies in 17 European countries, appears to be set for the second straight month in excess of the S&P 500’s profit.
French oil giant Total saw demand for its products in Europe nearly a third in the second quarter of the year, but the executive recovery is gaining momentum, said Patrick Pouyanné, the company’s chairman and CEO.
“We have seen a recovery here in Europe since June,” he said during a telephone interview with analysts. “In my opinion, activity in our marketing networks is back to 90 percent of the pre-covered levels.”
France, Europe’s second largest economy, was supported by aggressive government spending. President Emmanuel Macron has mobilized more than € 400 billion ($ 476 billion) in emergency aid and loan guarantees since the crisis began and is preparing an autumn package worth another € 100 billion.
These funds paid companies not to lay off workers, allowing more than 14 million employees to continue their paid stay, stay in their homes, accumulate small savings and continue spending. Late deadlines for business taxes and loan payments have saved companies from collapsing.
In the second quarter, when France was still partially blocked, the country’s economy contracted by almost 14 percent. Tourism, retail and manufacturing, the main pillars of the economy, have stopped.
but services, industrial activity and consumer spending show signs of improvement. The Banque de France, which originally expected the economy to shrink by more than 10 percent this year, recently predicted less damage.
In Spain, the feeling of recovery remains remote. From April to June, its economy contracted by almost 19 percent. The country’s unemployment rate exceeds 15 percent and could increase if the wage subsidy scheme expires in September.
Spain officially ended the coronavirus emergency on June 21, but infections have risen since then. The economic impact has been compounded by Britain’s decision to force passengers returning from Spain to quarantine for two weeks. Tourism accounts for 12% of the Spanish economy.
Italy is also very exposed to tourism. Its industry is concentrated in the north of the country, where the worst coronavirus occurred. The central bank expects the Italian economy to shrink by almost 10 percent this year.
However, exports rose sharply by more than one third in May compared to the previous month. According to the Italian trade association Confindustria, this is below the pre-pandemic level, but at the same level as that of German and American competitors.
“We are slowly recovering from the most violent decline in 70 years,” said Francesco Daveri, an economist at Bocconi University in Milan.
Both of Europe are coming to a halt, as its citizens are more likely to trust their governments.
Denmark acted early, imposing strict blockages and paying wage subsidies that reduced unemployment. Denmark has suffered far fewer deaths per capita than the United States and Britain.
As the virus was largely controlled, Denmark lifted the restrictions earlier, while Danes heeded the call to restore commercial life. According to the European Commission, the Danish economy is expected to shrink by 5.25 percent this year, with a significant improvement in the second half of the year.
In the United States, people have been tired of overwhelming and conflicting councils from above with more than 150,000 deaths.
The result has been record strains of new cases, along with a syndrome that is likely to persist – an aversion to being close to other people. This predicts slimmer prospects for retail, hotels, restaurants and other job-rich areas of the US economy.
Liz Alderman informed from Paris. Emma Bubola contributed news from Milan, Raphael Minder from Madrid and Stanley Reed and Esh Nelson from London.