THE V ASEMETRIC OF THE CRISIS WILL BE ONE U – EUROPE (Chapter 1)

Crisis teams have been formed focusing on the health aspects of the pandemic, but it has not been considered that a crisis is multidimensional, therefore much more balanced multidisciplinary teams should have been created.

The pandemic has shown, around the world, the ability or inability of governments to manage a large socio-economic crisis. We can consider, with the exception of China, the rest of the world, few governments have been able to pass this review.

When governments made the confinement decisions, the reaction rate, also asymmetrical, has not really been proportional to the results achieved, or at least those declared by the governments themselves. It is curious to see, as countries with less aggressive and drastic reactions, are reflecting much milder health, social and economic recovery data than those that reinforced their measures.

Some have sought to reflect the chaos of some of the countries that, like Germany, or Sweden, sought to establish a less aggressive policy initially, and had to end up extremely in solitary confinement, such as the UK, but the reality of each country has to be assessed from its own identity, it does not serve “coffee for all” or “bad of many comfort of fools”.

Coronavirus, flag of European Union. Epidemic covid-19 in European Union

Countries with less restrictive or less extended confinement over time, coincide with those countries of the industrial economy, rather than services, such as Germany. Interestingly, these countries could have lengthened confinement and the impact on the economy would have remained a V, albeit somewhat more aggravated, but with minimal impact within their GDP. This is not the case for service countries, just the countries of Southern Europe.

Except for the Italian industry, the rest of the Mediterranean countries have a service-based economic component. This indication makes decisions of long and asymmetrical confinements of the productive sector impossible to make the so-called V-crisis impossible.

If we focus on deconfining plans, we see that the engine of the economy of any country in the world, consumption, has been relegated to the last phase; it’s like allowing us all to get in one car to move from one point to another but forget to put the engine inside the vehicle. Only the Flintstones could move such vehicles, and it was animated fiction, not the sad reality we have to face.

The consumer economy is mainly marked by the opening of bars, restaurants, hotels and trade in general. In countries such as Spain, the first three are the ones that move the poor domestic industry, since consumption is more linked to import productions, mainly. But in any case, the permission to launch an industry, in many cases aimed at supplying the needs of consumption, counter the logic of starting the economy, because the consumption sector’s deconfine plan creates some inconveniences and doubts that can cause the sector to stop until the end of the year, so that same, as a domino effect , will have an impact on the economic base of SMEs, mainly, and the engine of the country’s economy. It is like allowing the production of pencils and paper but not allowing the opening of schools until October, in the end, producers, stationery, bookstores, etc., would be contingent on each other and the whole sector would remain confined or slowed.

If we add to this one the intention of some governments to slow consumption by up to 30% of their capacity, we are proposing two possible alternatives, or a 300% hyperinflation that the government will not allow, but which would be forced to maintain business costs, or postpone the opening of them by entrepreneurs in order not to end up bankrupt. There is a curious element, because government experts have only assessed or impacted against the performance element of business, reducing it to 30%, but have not raised cost reductions proportionately, such as elimination, or tax confinement during that same period of restrictions, which would partially help reduce negative cash flows in business.

Against this background, and planning that consumption will not achieve a rational opening before the beginning of next year, a part of the industrial sector will find itself slowed to the same dates with what the asymmetric V posed by the southern governments, such as Spain, will be transformed into a long base L with a more than dubious rise in at least the next three years, to end up being a U but with a basis of three years and not quarters as the government intends to show.

It is surprising to observe graphs where productive growth is placed in the third quarter, when everyone knows that the third quarter of the Mediterranean countries is contingent on the tourism sector, and with a base of impossibility of international displacement; doubts in the air transport sector for the rest of the year, with claims for nationalizations of the same sector in some countries; and inability to define how the future human flow between countries with health passport approaches in countries will be managed, without initial cohesion that homogenic them; it does not can start operating until 2021 and recovers not before 2023, when international parameters have been established and agreed upon. In short, how the economy will grow in the third quarter if the engine is to remain confined by decree or mandatory will of the same sector.

If we add to this that part of the already critical industrial mass has been assumed by China, as is the case with Italy; and that the rest of the industry depends on the full performance of the northern economies, large rebounds in the economy cannot be expected before the beginning of 2021, but with the maintenance of the decline in the next two quarters. That purported V is simply a fallacy, or as governments like to say now, pure communicative FAKE.

In the case of the United Kingdom, the Brexit component plunged it before the pandemic into a crisis in the supply of consumer products, and in particular the health market, which has aggravated its health situation and social numbers by trying to follow the patterns of the economies of northern Europe. They were unprepared and their own crisis has plunged them further into chaos. Their own recovery will be contingent on the post-Brexit approach they were obliged to face, making their dynamics much more asymptomatic than that of the rest of Europe.

If the estimates of the fall in GDP are 9%, the government will likely have to rethink them when the sectors that move the Spanish economy claim to fall by 85% in their GDP, which will impact the rest of the productive sectors. The numbers remain unsquared and suggest that that number can be closer to 30% that no one wants to hear today. And obviously, if the numbers don’t add up, unemployment even less where the figure may end up approaching 10 million, rather than the 3 or 6 that the government shuffles, although it could initially be solved with the indefinite extension of the TENS, which account for 3 million more affected, even if most are irrecoverable.

It is only necessary to identify, in addition, the true impact of the Chinese government’s meddling in the country’s most important industries, both productive and serviced. But this component will have a hard time identifying it until the medium or long term, when it is unworkable to repair it. That’s when the third wave of the crisis will come, which will be even more devastating than the first, COVID-19, or the second, the chaos of deconfining.