European Union’s tryst in the fight against the coronavirus pandemic continues to become bigger and broader by every passing day. During the weekend, the managing director of European Stability Mechanism, Klaus Regling, while speaking on the issue said that the second phase of funding would be needed and at least around another €500 billion would be required to be put in by the European institutions, with a scope of even more. He also stressed that policymakers in the union need to deliberate and come up with new instruments with an open mind, while also making good use of the existing multilateral financial institutions because it is readily available and in particular the European Union Commission and the union’s budget. The coronavirus pandemic has severely battered the European Union with almost all countries in the region reporting hundreds of thousands infected and thousands of dead. The European Union economy has taken a severe beating with several of its member countries in lockdown and almost except essential services are closed. It is being estimated that the losses due to this pandemic will be in hundreds of billions of euros and unemployment in the region will shoot up significantly.
Until the emergence of the United States as the new epicentre of the Coronavirus pandemic, Europe had been the epicentre of the pandemic after China. Though not originating in Europe the virus has now killed a greater number of people in Europe and elsewhere in the world outside of China. Spain is the worst affected country in the region, with nearly 200,000 people being infected till date out of which about 21,000 have already been reported dead. Italy is the second most infected country in the region reporting as many as 178,500 cases till date out of which at least 23,500 have already succumbed to this viral infection. France, Netherlands, United Kingdom, Austria, Sweden, Germany, Belgium, Switzerland, and Denmark are other European countries that have reported hundreds of thousands of cases out of which tens of hundreds are dead, while not as badly affected as the United States of America. As lockdown conditions in many of these countries continue, all but essential work requiring travelling out of one’s house have been prohibited. All Large as well as small types of business establishments have asked their employees to either work from home or take leaves while some businesses have decided to shut operations temporarily till better times come to prevail. The general sentiments thus across the European Union region is at an all-time low, with the danger of large-scale unemployment looming large across industries.
Prior to this request being made by the managing director of European Stability Mechanism, several measures have already been made to pump in more cash into the eurozone, to prop up the business sentiments in the region. Earlier this month the finance ministers of the regions had agreed on a €540bn package for the countries of the region, and prior to that on 18th of March the European Central Bank had launched a mega Bond repurchase scheme worth €750 billion to bring in more liquidity into the regions’ economic system. The bank, however, was not the first in Europe and was only the latest amongst a host of central banks who had already announced similar stimulus packages to protect their economies from the pandemic. Across the Atlantic, the British government has announced several stimulus measures including refinancing of corporate loans to be undertaken by Bank of England worth £350 billion to help businesses in that country and in the previous week it had announced the extension of its furloughing scheme originally meant for small and medium sized British businesses to include even large businesses to help them stay afloat in this highly volatile economic environment.
The foreign revenue earning businesses in the region have taken a beating due to this outbreak. Several small, medium-sized as well as large countries in Europe had a large portion of their earnings coming out of the hospitality industry. A large number of tourists from every part of the world and even from within Europe throng these countries and bring in revenues to the European hotel industry, travel industry as well as food and beverage industries, which in turn provide employment to millions of people in the region. However, since the hospitality industry along with some other industries is the ones which are now being held responsible for being the catalyst to the spread the virus so fast, they are the ones facing the maximum brunt of the current economic slowdown. In fact, Chinese tourists who travelled from the infected regions in late February to tourist spots in Europe are the ones being suspected of carrying the virus with them and causing the massive outbreak first to Italy and subsequently proceeding to infect other countries via people who travelled from Italy to other European countries. The industry that has taken the second-worst beating is the travel industry which is also being seen as the second biggest culprit of spreading the virus, led by the airline industry which is losing in billions till now. The International Air Transport Association (IATA) in a report published on 5th March 2020 had stated that should there be an extensive spread of the pandemic, then the European Air travel markets of Austria, France, Italy, Germany, Netherlands, Norway, Spain, Switzerland, Sweden and the United Kingdom would be some of the regions taking the biggest beating. The report further states that the regional aviation industry could lose as much as 24 per cent of its market base, translating into a revenue loss to the tune of $37.3 billion. Among other transportation services in the region Railways and road transport services across the region have also been seen curtailing their operations on account of a drop in demand affecting many scheduled departures and also there is no certainty regarding how long will it take before activity in these sectors begin.
Given the state of the industry in the European Union, especially the small countries, protecting employment in the region would be the most challenging. The entire eurozone economy is expected to shrink by at least 7.5 per cent this year, with the IMF prediction estimating a $9 trillion losses for the entire world economy in the next two years in its best-case scenario. It is thus highly likely that member state finance ministers will agree to the request made by the managing director of European Stability Mechanism.
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