Locked-down Europe asks: How long can we afford
this?
Governments balance soaring death tolls against
potential economic collapse.
By PAOLA
TAMMA AND JAKOB HANKE VELA 3/23/20, 2:54 PM CET Updated 3/24/20, 8:22 AM CET
As
countries across the world announce lockdowns and multibillion-euro bailouts,
they know these can only offer short-term fixes | Benoit Doppagne/AFP via Getty
Images
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 won't arrive until the end of 2021. The message is clear: It won't
be possible for people to stay at home until then.
"It’s a very difficult balancing act. It’s not
clear that any government has a credible exit strategy" — Mujtaba Rahman,
Europe director at EurasiaGroup
It's 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.
"It’s
a very difficult balancing act," said Mujtaba Rahman, Europe director at
EurasiaGroup, a political risk consultancy firm. "It’s 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 we’ll have to keep
this reduction of social contacts," he said Thursday.
That’s
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 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 on the most radical forms
of containment and prioritize economic growth in the coming months.
“Policymakers
are actively shutting down large economies. That’s why the extent of the
recession we’re 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 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 it's 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 won't 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 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 didn’t give an end date. So
far, production hasn't 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 Monday, 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.
So far, no government has communicated a long-term
plan.
“Our
objective is to delay and flatten the peak of the epidemic by bringing forward
the right measures at the right time, so that we minimize suffering and save
lives,” he said last week. He later added that “we can turn the tide within the
next 12 weeks” and expect the first trials for a vaccine to start within a month.
Chancellor
Angela Merkel of Germany, where meetings of more than two people were banned
over the weekend, is also buying time: “There is still no therapy against the
coronavirus nor a vaccine. As long as this is the case, there is only one thing
we can do, and that is to slow down the spread of the virus, stretch it over
the months and thus gain time,” she said in a highly unusual national address.
So far, no
government has communicated a long-term plan.
Ebbs and
flows
Between an
economic meltdown and accepting eye-watering fatality rates from the virus,
there may be a third way.
If testing
becomes more widely available in the coming months, governments may find out
that a large percentage of the population has already had an asymptomatic
infection. That may be the moment when countries start lifting social
distancing measures.
Drosten
said he expects antibody tests — which show past infections against which the
body has developed defenses — will become available “in the coming weeks.”
The Imperial
College London study offers another approach: A phase of alternating lockdowns
and relaxations over a total period of two years, during which governments
relax social distancing measures for about a month, every three months or so.
Sébastien
Maillard, director of the Jacques Delors Institute in Paris, said he expects “a
moment more of strict confinement, gradually back to a functional economy, and
perhaps unfortunately later in the year we’d have to go back to social
confinement until we get that vaccine.”
Researchers
warned that any periods of respite would be short. “Social distancing — plus
school and university closure, if used — need to be in force for the majority
of the two years of the simulation,” the study's authors wrote.
This leaves
governments with the same dilemma: They will need to prepare their populations
for either a year or more under lockdown, or for massive deaths in the coming
months. Neither is an easy sell.
"There will be a before and an after" this
pandemic, said Internal Market Commissioner Thierry Breton. "Hopefully the
human price will be limited. The economic price will be high."
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