11 ms·

The European Union Is Facing Its Worst Recession Ever. Watch Out, World

38 points by elsewhen 6y ago

downerending 6y ago
Suspect they'll be in good company.
notechback 6y ago
Original report and PR: https://ec.europa.eu/commission/presscorner/detail/en/ip_20_799 https://ec.europa.eu/commission/presscorner/detail/en/ip_20_...
littlestymaar 6y ago
I don't really understand all the fear around “the current recession”: so far the countries have been locked down, which means almost freezing the economies for 2 month (in France, more than half of the private sector employees were idle, and paid by the government to stay home). Indeed as a result the 12-month GDP including this period is lower, but that doesn't really mean anything: it's just what you get when you average a normal period with a frozen one. Of course I'am worried about what's next, because when we are reopening not everything will reopened (tourism, restaurants, and many things are going to stay closed for a looong time) and then we will see long-term damage. But the current figures just sounds like a calculation artifact to me. Edit: in fact, I'm even worried that the fear around the “artificial recession” is going to create a real one: many countries are currently reopening because they are afraid of the recession, but it's way too early so they won't reopen completely and they may even face a “second wave” which could probably have been avoided if the lockdown was sustained enough to eradicate the disease in the country.
- pjmlp 6y ago
  Everyone that isn't able to work from home, and lives on the edge of their economies really understands it.
  - littlestymaar 6y ago
    In the US I guess, but in France and AFAIK in most Europe, people are being paid even when they can't work (not 100% of their salaries, but it's still 3/4 of it here in France + benefits for the lower incomes). I this kind of crisis, what's remain of the welfare state is immensely valuable, too bad many American citizens have been brainwashed by cold war propaganda and consider this as socialism…
    - boublepop 6y ago
      Some people are, but we have still seen massive layoffs and many companies going bankrupt. The structure of support makes things less severe for the average citizen than in the us, but that doesn’t mean we’ve dodged the overall effects on the economy.
    - lbeltrame 6y ago
      > people are being paid even when they can't work Not in Italy, for example, where a tiny fraction of people got 600 euro (minus tax) for the March period, and for the rest there are loans that could be technically obtained and need to be repaid within 6 years (but the procedure is byzantine). And the government asked for "an act of love" from the banks (== give money without guarantees) instead of, say, act as guarantor (for the above-mentioned loans, there is some form of guarantee, but not everything). Also the EU fiscal policy has not changed in practice, so you can't go on a spending spree without facing the consequences later. I'm not surprised the GDP is expected to drop by 15%. Very tough times ahead.
    - pjmlp 6y ago
      Except the minor detail that when you have low income and bills to pay, not only 3/4 isn't enough, the government doesn't have infinite amount of money for the whole country.
    - grandmczeb 6y ago
      Unemployment in the US is currently $600/week, which incidentally is almost exactly the median household income in France. On top of that there’s also state benefits (up to $450/week in California).
- mns 6y ago
  I think, just like some comments below mention, it's hard to grasp this when you are not affected by this. Most of the people here have savings or work in fields that are still ok, but there is more to the world than this. I work in a company which now had its best quarter ever, thanks to this situation, as we're focused on things that became all of the sudden very important. I have colleagues that are working remotely, because they just decided that it's a better financial option for them to go back to their home countries, instead of working in a more expensive one, where we are based. They think that everything is fine, were joking that they don't care, while in the same time telling stories how in their home town (Eastern European legacy) the only 2 factories that employed most of the active population are closed and people have a very low income now for over 2 months and it appears that the social impact and the pressure of this might not have good results, so now all of the sudden, when crime rates go up and people are becoming more and more desperate, it's starting to creep on them.
  - andarleen 6y ago
    That’s odd, which east european country is that? Most east EU nations have very low covid numbers, and people are still allowed to work. Some factories are indeed closed, but in countries like Romania for instance, where people living on the country still farm chicken and pigs, and those in the city have relatives doing it, food is not really an issue. Also there is a rent freeze, banks suspended mortgages and utilities are delayed. Kicking someone out for not paying rent is also illegal during the pandemic. From what I gather Italy, France and others already have social tensions due to the virus, but haven’t heard about similar issues in east europe.
    - orwin 6y ago
      France had social tension prior to the virus (3 month prior healthcare workers were gassed during a protest). If anything we have less social tension now, but it might be starting to build up too and explode. And we are more than self-sufficient concerning agricultural product even with the reduced output caused by the pandemic. We could also reduce our meat intake by 10%, doing so would allow us to export as much food as we did in 2019.
- PeterStuer 6y ago
  Capitalism comes with an embedded growth obligation. At the meta/aggregate level we have already consumed / are consuming the future and our current efforts are to fill the gap with interest. So unless the top of the pyramid decides we can suspend capitalism for a few months, all the dominoes keep cascading growth obligations downstream and if you can't meet them you are pushed over the edge of the cliff.
  - whb07 6y ago
    Capitalism isn’t embedded with anything. It’s human desire that is endless and never satisfied. It’s not capitalism that has Leonardo DiCaprio date multitudes of models in their 20s. It’s not capitalism when Soviet citizens would line up outside of the better armory factories to get their allotment of cutlery.
- andarleen 6y ago
  Europe has already been vulnerable to populism, and this pandemic and the recession to follow will be heavily exploited by far right populists. Also the fact that the EU itself was quite useless through-ought the process will make it an easy target. It will be a difficult few years from this perspective and potentially have geopolitical consequences.
- mcv 6y ago
  In Netherland, restaurants and cafes can reopen soon, but it has to be by reservation, so the owner can manage occupancy, and no more than 30 people can be inside, including staff. Of course everybody will have to keep 1.5 m distance from each other. I also know of one restaurant in Amsterdam that is testing a setup that will have individual glass cabins for each table[0]. Many restaurants in Amsterdam, including Michelin-star restaurants, have switched to delivery. We've had some amazing delivery food in the past weeks (though the best required quite a bit of preparation at home). Simply closing everything down is not sustainable; we need to figure out how to live with this new situation. [0] https://dutchreview.com/coronavirus/1-5m-society-amsterdam-restaurant-to-offer-four-course-meal-in-individual-glasshouses/ https://dutchreview.com/coronavirus/1-5m-society-amsterdam-r...
- conistonwater 6y ago
  Try to compare this sort of logic with what we already know happened with the last financial crisis. Before that crisis, banks lent out a lot of dud loans and people bought too many expensive houses. A lot of the people who ended up being unemployed afterwards were not the people who made bad financial decisions, they were just a regular part of the economy, and the damage lasted for many years. I think if you tried to carry through with the "average of normal + lockdown" logic for the financial crisis, you'd get an unrealistic result: you'd expect the economy to be back to normal fairly soon because all those people who could be working the way they were before the crisis could just show up to work (they can do that work just as well as they could before the crisis, obviously). None of this has anything to do with "fear", this is just what recessions look like. Just because the system could go back to normal in no way shows that it will, or even that it is likely to, and that's a fundamental feature of recessions. It's like the system as a whole has multiple equilibriums, and which equilibrium it ends up in depends on the history leading up to it: the "average of normal + lockdown" only tries to show that a desirable equilibrium exists and vaguely implies that that's the equilibrium it will end up in. My understanding is that conventional economics and past experience both say that it is far more likely that it won't and that the recession will be as genuine as any other.
- fallingfrog 6y ago
  Take a look at this graph of us unemployment over time. https://static01.nyt.com/images/2020/04/03/upshot/03up-unemploy-1585858280885/03up-unemploy-1585858280885-mediumSquareAt3X.png https://static01.nyt.com/images/2020/04/03/upshot/03up-unemp... Unemployment always goes up quickly, then takes time to go back down. It’s like any other injury; the damage happens fast, healing takes time. Given the damage that has already occurred, and the rate that jobs can be added back to the economy, I’d guess that it will be something like 10 years before unemployment goes back down to pre-corona levels. If it just jumps back as soon as the lockdown is lifted, it will be the first time in history that has ever happened.
zaro 6y ago
And the rest of the world not?
CryptoPunk 6y ago
Every percentage drop in per capita GDP is associated with a loss in life expectancy. The response to the coronavirus pandemic, of mandatory lockdowns of nearly the entire population, for several weeks, may prove to be one of the most egregious cases of self-inflicted social harm the world has ever seen.
- Isinlor 6y ago
  It's false choice. This virus kills 0.5 to 1% of infected people across population. It can infect more than 50% of the population. Everyone would know somebody who died because of the virus. The economy can not function when people are dying left and right. For example, Sweden will not be ok economically. We have already 0.1 million dead. EU has 445 million people, so more than 1 million can still die 445(1000^2)0.5*0.5% There is also question about long term health of people who got COVID-19. Based on Japanese study on Grand Princess passengers [0] and some 6 divers [1] all with mild cases from Germany around 50 to 80% of people seem to have damage to the lungs visible on CT scans after mild symptomatic or even asymptomatic infection. Two of the divers had significant oxygen deficiency when doing physical exercise after 5-6 weeks of recovery. The guess of the doctor who was inspecting them is that this is permanent damage that may take years to recover if ever. [0] https://pubs.rsna.org/doi/10.1148/ryct.2020200110 https://pubs.rsna.org/doi/10.1148/ryct.2020200110 [1] https://translate.google.com/translate?sl=auto&tl=en&u=https%3A%2F%2Fwww.wetnotes.eu%2Ftauchen-nach-covid-19-erkrankung%2F https://translate.google.com/translate?sl=auto&tl=en&u=https...
  - llarsson 6y ago
    If you mean in the context of Swedish deaths, those are 2,900 or so deaths, not 0.1 million. Edit: I interpreted the number to be in the context of Sweden, as it was mentioned just in the sentence prior. Reply updated to make that clear.
    - vertex-four 6y ago
      https://www.worldometers.info/coronavirus/coronavirus-death-toll/ https://www.worldometers.info/coronavirus/coronavirus-death-... - you're a couple orders of magnitude off the actual death toll.
aaron695 6y ago
How about we call it what it is, a Depression. And let people make the argument if "it's just a Recession Bro" What time line do people expect for this to be "just a Recession"? When do people expect business to stop being legally stopped from opening and people wanting to use them across the world. So when will all borders reopen for instance? Vaccines might be 2 years. So this is the best case, the world let's C19 run it's natural course. Then after that, we will have to pull out of a global financial slump. We have both a lack of financial confidence combined with a fear of a virus to deal with.

38 points by elsewhen 6y ago

Suspect they'll be in good company.

Original report and PR: https://ec.europa.eu/commission/presscorner/detail/en/ip_20_799 https://ec.europa.eu/commission/presscorner/detail/en/ip_20_...

littlestymaar 6y ago

I don't really understand all the fear around “the current recession”: so far the countries have been locked down, which means almost freezing the economies for 2 month (in France, more than half of the private sector employees were idle, and paid by the government to stay home). Indeed as a result the 12-month GDP including this period is lower, but that doesn't really mean anything: it's just what you get when you average a normal period with a frozen one. Of course I'am worried about what's next, because when we are reopening not everything will reopened (tourism, restaurants, and many things are going to stay closed for a looong time) and then we will see long-term damage. But the current figures just sounds like a calculation artifact to me. Edit: in fact, I'm even worried that the fear around the “artificial recession” is going to create a real one: many countries are currently reopening because they are afraid of the recession, but it's way too early so they won't reopen completely and they may even face a “second wave” which could probably have been avoided if the lockdown was sustained enough to eradicate the disease in the country.

pjmlp 6y ago
Everyone that isn't able to work from home, and lives on the edge of their economies really understands it.
- littlestymaar 6y ago
  In the US I guess, but in France and AFAIK in most Europe, people are being paid even when they can't work (not 100% of their salaries, but it's still 3/4 of it here in France + benefits for the lower incomes). I this kind of crisis, what's remain of the welfare state is immensely valuable, too bad many American citizens have been brainwashed by cold war propaganda and consider this as socialism…
  - boublepop 6y ago
    Some people are, but we have still seen massive layoffs and many companies going bankrupt. The structure of support makes things less severe for the average citizen than in the us, but that doesn’t mean we’ve dodged the overall effects on the economy.
  - lbeltrame 6y ago
    > people are being paid even when they can't work Not in Italy, for example, where a tiny fraction of people got 600 euro (minus tax) for the March period, and for the rest there are loans that could be technically obtained and need to be repaid within 6 years (but the procedure is byzantine). And the government asked for "an act of love" from the banks (== give money without guarantees) instead of, say, act as guarantor (for the above-mentioned loans, there is some form of guarantee, but not everything). Also the EU fiscal policy has not changed in practice, so you can't go on a spending spree without facing the consequences later. I'm not surprised the GDP is expected to drop by 15%. Very tough times ahead.
  - pjmlp 6y ago
    Except the minor detail that when you have low income and bills to pay, not only 3/4 isn't enough, the government doesn't have infinite amount of money for the whole country.
  - grandmczeb 6y ago
    Unemployment in the US is currently $600/week, which incidentally is almost exactly the median household income in France. On top of that there’s also state benefits (up to $450/week in California).
mns 6y ago
I think, just like some comments below mention, it's hard to grasp this when you are not affected by this. Most of the people here have savings or work in fields that are still ok, but there is more to the world than this. I work in a company which now had its best quarter ever, thanks to this situation, as we're focused on things that became all of the sudden very important. I have colleagues that are working remotely, because they just decided that it's a better financial option for them to go back to their home countries, instead of working in a more expensive one, where we are based. They think that everything is fine, were joking that they don't care, while in the same time telling stories how in their home town (Eastern European legacy) the only 2 factories that employed most of the active population are closed and people have a very low income now for over 2 months and it appears that the social impact and the pressure of this might not have good results, so now all of the sudden, when crime rates go up and people are becoming more and more desperate, it's starting to creep on them.
- andarleen 6y ago
  That’s odd, which east european country is that? Most east EU nations have very low covid numbers, and people are still allowed to work. Some factories are indeed closed, but in countries like Romania for instance, where people living on the country still farm chicken and pigs, and those in the city have relatives doing it, food is not really an issue. Also there is a rent freeze, banks suspended mortgages and utilities are delayed. Kicking someone out for not paying rent is also illegal during the pandemic. From what I gather Italy, France and others already have social tensions due to the virus, but haven’t heard about similar issues in east europe.
  - orwin 6y ago
    France had social tension prior to the virus (3 month prior healthcare workers were gassed during a protest). If anything we have less social tension now, but it might be starting to build up too and explode. And we are more than self-sufficient concerning agricultural product even with the reduced output caused by the pandemic. We could also reduce our meat intake by 10%, doing so would allow us to export as much food as we did in 2019.
PeterStuer 6y ago
Capitalism comes with an embedded growth obligation. At the meta/aggregate level we have already consumed / are consuming the future and our current efforts are to fill the gap with interest. So unless the top of the pyramid decides we can suspend capitalism for a few months, all the dominoes keep cascading growth obligations downstream and if you can't meet them you are pushed over the edge of the cliff.
- whb07 6y ago
  Capitalism isn’t embedded with anything. It’s human desire that is endless and never satisfied. It’s not capitalism that has Leonardo DiCaprio date multitudes of models in their 20s. It’s not capitalism when Soviet citizens would line up outside of the better armory factories to get their allotment of cutlery.
andarleen 6y ago
Europe has already been vulnerable to populism, and this pandemic and the recession to follow will be heavily exploited by far right populists. Also the fact that the EU itself was quite useless through-ought the process will make it an easy target. It will be a difficult few years from this perspective and potentially have geopolitical consequences.
mcv 6y ago
In Netherland, restaurants and cafes can reopen soon, but it has to be by reservation, so the owner can manage occupancy, and no more than 30 people can be inside, including staff. Of course everybody will have to keep 1.5 m distance from each other. I also know of one restaurant in Amsterdam that is testing a setup that will have individual glass cabins for each table[0]. Many restaurants in Amsterdam, including Michelin-star restaurants, have switched to delivery. We've had some amazing delivery food in the past weeks (though the best required quite a bit of preparation at home). Simply closing everything down is not sustainable; we need to figure out how to live with this new situation. [0] https://dutchreview.com/coronavirus/1-5m-society-amsterdam-restaurant-to-offer-four-course-meal-in-individual-glasshouses/ https://dutchreview.com/coronavirus/1-5m-society-amsterdam-r...
conistonwater 6y ago
Try to compare this sort of logic with what we already know happened with the last financial crisis. Before that crisis, banks lent out a lot of dud loans and people bought too many expensive houses. A lot of the people who ended up being unemployed afterwards were not the people who made bad financial decisions, they were just a regular part of the economy, and the damage lasted for many years. I think if you tried to carry through with the "average of normal + lockdown" logic for the financial crisis, you'd get an unrealistic result: you'd expect the economy to be back to normal fairly soon because all those people who could be working the way they were before the crisis could just show up to work (they can do that work just as well as they could before the crisis, obviously). None of this has anything to do with "fear", this is just what recessions look like. Just because the system could go back to normal in no way shows that it will, or even that it is likely to, and that's a fundamental feature of recessions. It's like the system as a whole has multiple equilibriums, and which equilibrium it ends up in depends on the history leading up to it: the "average of normal + lockdown" only tries to show that a desirable equilibrium exists and vaguely implies that that's the equilibrium it will end up in. My understanding is that conventional economics and past experience both say that it is far more likely that it won't and that the recession will be as genuine as any other.
fallingfrog 6y ago
Take a look at this graph of us unemployment over time. https://static01.nyt.com/images/2020/04/03/upshot/03up-unemploy-1585858280885/03up-unemploy-1585858280885-mediumSquareAt3X.png https://static01.nyt.com/images/2020/04/03/upshot/03up-unemp... Unemployment always goes up quickly, then takes time to go back down. It’s like any other injury; the damage happens fast, healing takes time. Given the damage that has already occurred, and the rate that jobs can be added back to the economy, I’d guess that it will be something like 10 years before unemployment goes back down to pre-corona levels. If it just jumps back as soon as the lockdown is lifted, it will be the first time in history that has ever happened.

zaro 6y ago

And the rest of the world not?

CryptoPunk 6y ago

Every percentage drop in per capita GDP is associated with a loss in life expectancy. The response to the coronavirus pandemic, of mandatory lockdowns of nearly the entire population, for several weeks, may prove to be one of the most egregious cases of self-inflicted social harm the world has ever seen.

Isinlor 6y ago
It's false choice. This virus kills 0.5 to 1% of infected people across population. It can infect more than 50% of the population. Everyone would know somebody who died because of the virus. The economy can not function when people are dying left and right. For example, Sweden will not be ok economically. We have already 0.1 million dead. EU has 445 million people, so more than 1 million can still die 445(1000^2)0.5*0.5% There is also question about long term health of people who got COVID-19. Based on Japanese study on Grand Princess passengers [0] and some 6 divers [1] all with mild cases from Germany around 50 to 80% of people seem to have damage to the lungs visible on CT scans after mild symptomatic or even asymptomatic infection. Two of the divers had significant oxygen deficiency when doing physical exercise after 5-6 weeks of recovery. The guess of the doctor who was inspecting them is that this is permanent damage that may take years to recover if ever. [0] https://pubs.rsna.org/doi/10.1148/ryct.2020200110 https://pubs.rsna.org/doi/10.1148/ryct.2020200110 [1] https://translate.google.com/translate?sl=auto&tl=en&u=https%3A%2F%2Fwww.wetnotes.eu%2Ftauchen-nach-covid-19-erkrankung%2F https://translate.google.com/translate?sl=auto&tl=en&u=https...
- llarsson 6y ago
  If you mean in the context of Swedish deaths, those are 2,900 or so deaths, not 0.1 million. Edit: I interpreted the number to be in the context of Sweden, as it was mentioned just in the sentence prior. Reply updated to make that clear.
  - vertex-four 6y ago
    https://www.worldometers.info/coronavirus/coronavirus-death-toll/ https://www.worldometers.info/coronavirus/coronavirus-death-... - you're a couple orders of magnitude off the actual death toll.

aaron695 6y ago

How about we call it what it is, a Depression. And let people make the argument if "it's just a Recession Bro" What time line do people expect for this to be "just a Recession"? When do people expect business to stop being legally stopped from opening and people wanting to use them across the world. So when will all borders reopen for instance? Vaccines might be 2 years. So this is the best case, the world let's C19 run it's natural course. Then after that, we will have to pull out of a global financial slump. We have both a lack of financial confidence combined with a fear of a virus to deal with.