No European country is escaping the economic consequences of the coronavirus, but the pain won’t be divided equally.
Southern Europe, which bore the brunt of the last big economic crisis, will suffer the most. Countries like Greece and Italy depend heavily on tourism and are still suffering the lingering effects of the eurozone debt meltdown over the last decade, including austerity programs that left their health care systems ill prepared for a pandemic.
But even countries regarded as paragons of competitiveness, like Germany and the Netherlands, may turn out to have weaknesses that, until a few weeks ago, were regarded as strengths.
Germany’s automakers, for example, have dominated the luxury car business. But the virus exposed their dependence on sales in China, and now they are closing factories all over the region.
Any country with lots of small firms and self-employed people will suffer as well, because these businesses typically have thinner financial reserves to survive a sudden plunge in sales. Greece and Italy are examples, but so is the Netherlands.
Other countries may have hidden strengths. An economy with lots of companies that can deliver their services digitally, and where employees can work from home, should be relatively resilient. This could be Estonia’s moment; its capital, Tallinn, has a lively digital start-up scene.
The most important economic policy for any country, economists at Oxford Economics point out, is to get the virus under control. That gives the advantage to countries with effective leaders and well-equipped health care systems.
Countries in southern Europe cut back on health care spending during the eurozone debt crisis to meet stringent budget limits that were a condition for receiving bailouts. Now these countries are tragically vulnerable.
The virus has spread its woe in unpredictable ways, and there are certain to be more unpleasant surprises.
“It’s still hard to say which country will be hit the most and which will be the most resilient,” said Carsten Brzeski, chief eurozone economist at the Dutch bank ING. “We are still in the middle of the wave.”
The European economy is, by design, highly interconnected, and even countries that seem relatively well protected will not be able to isolate themselves from the suffering of their neighbors.
“While there are some countries far better prepared than others, no countries are well prepared,” said Ryan Morhard, a global health security expert at the World Economic Forum in Geneva.
Asked to name a country that has handled the crisis fairly well, Mr. Morhard cited Singapore, which of course is not in Europe.
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Here’s a look at how the virus could play out in different parts of the eurozone.
With solid government finances, low unemployment and a broad social safety net, Germany looks resilient. The government was able to assemble a powerful stimulus package without endangering the country’s credit rating. It has more acute-care hospital beds per person than any other country in Europe, according to data compiled by Oxford Economics.
But Germany entered the crisis with weak growth, and its auto and machinery makers are highly vulnerable to supply-chain disruptions and restrictions on social contact. You can’t work from home at the Mercedes-Benz assembly line. Shutdowns by big employers like Volkswagen and Daimler will provoke a chain reaction among suppliers and cause a spike in joblessness.
It would be hard to think of a developed country more vulnerable to a pandemic than Italy. Tourism is an important part of the economy, as are small firms. The enormous government debt, equal to 137 percent of gross domestic product, leaves Rome with limited leeway to offer financial support to stricken businesses.
Italy was headed for a recession even before the coronavirus hit. Its economic output is still less than it was before the global recession of 2009. Its people were among the world’s healthiest, but the virus outbreak exposed a critical shortage of intensive-care hospital beds. Even the quality of internet connections is below par.
“Italy clearly will be hit the most,” Mr. Brzeski said.
The country is home to numerous large corporations, as well as the law firms, accountants and consultants who serve them, thanks to favorable tax laws. Employees of these companies should for the most part be able to work from home. In fact, many already do. Some 14 percent of employed Dutch people work from home.
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But the Netherlands has a large proportion of small businesses, and the hard-hit airline industry is a major employer. Schiphol, outside Amsterdam, is one of Europe’s largest airports and a major hub for Air France KLM, which has slashed service as much for 90 percent and asked for government assistance.
After a dismal decade of austerity and economic decline, when joblessness peaked at 28 percent and the country lost a quarter of its economic output, Greece had been showing signs of recovery. Unemployment was down to 16.5 percent, and investors were buying Greek debt again. But no country in the eurozone is more dependent on tourism, and it is a nation of small businesses, which typically do not have many resources to weather hard times.
One surprising upside for Greece is its budget: It has been running a surplus. Some officials and experts argue that now is the time to cut the Greeks some slack and make sure 10 years of tough sacrifices don’t go to waste.
Spain was Europe’s fastest-growing large country last year as it rebounded strongly from the depths of the eurozone debt crisis. But unemployment, at nearly 14 percent, is still among Europe’s highest, and only Greece is more dependent on tourism. Spain is also a major automaking country. Volkswagen, Renault and Ford Motor have all closed their Spanish factories in recent days. Spain’s hospitals have even fewer acute-care beds per person than Italy.
France may be somewhat less vulnerable than its neighbors. Manufacturing is not as important to the economy as it is in Germany, and the proportion of small firms and self-employed people is smaller than in Italy or the Netherlands. Many French people work for large companies, which should have an easier time surviving the crisis. Tourism is a surprisingly small part of the economy, even if Paris seems to be perpetually mobbed by people wielding selfie sticks.
The government’s oft-criticized tendency to meddle in corporate affairs could be an advantage now that there is a need for political leaders to coordinate a defense against the virus. And France has some of Europe’s best internet connections.
The tiny Baltic nation, population 1.3 million, has one of the most dynamic economies in the eurozone. Growth last year was more than 4 percent, unemployment is less than 5 percent, and government debt is negligible, allowing plenty of room for fiscal stimulus.
Estonia is known as one of the most tech-savvy countries in the world, potentially a big advantage as the outbreak forces economic activity online. The software for Skype was written in Tallinn. Bolt, a ride-hailing, electric scooter and delivery service that is challenging Uber, is based there. But as the virus spreads, Estonia must also take care to protect those who haven’t shared in the boom: More than a fifth of the population lives in poverty.
Matina Stevis-Gridneff contributed reporting.