Covid-19 – Georgios Ardavanis (Ph.D.)

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“Let’s get a glimpse of the facts demonstrating why business is not expected to return to pre_Corona Virus (CV) levels until 2023 and the need to implement new austerity programs to weak economies.”
The cost of the Government’s pandemic response, which includes paying salaries, tax breaks, and support for businesses, is crystallized daily. That means that debt management offices will quadruple their planned bond sales to fund a budget deficit that is expected to swell beyond levels seen in the financial crisis and hit a postwar high.
Covid-19 has exposed shortages of staff and vital equipment in the health system. It is also highlighted how many workers live from pay-check to pay-check. Today, we have workers in absolutely desperate financial need. Some people are sitting at home doing nothing, bored out of their minds, and not contributing anything to this crisis. Already there is a strong consensus that there should be a different tack, with forecasts suggesting the economy could shrink more in 2020 than in any year since the aftermath of WWI. Indeed, austerity would be a tough sell politically, plus it will fuel a backlash in disaffected people and regions, contributing to significant socioeconomic impacts. The last ten years of fiscal consolidation through spending cuts have put many vital public services under massive strain. I wonder if the people are willing or have the strength to go through it again. The measures taken so far have huge repercussions on public finances.
This pandemic has mercilessly exposed the deep fault lines in our labor markets. Enterprises of all sizes have already stopped operations, cut working hours, and laid off staff. Many are teetering on the brink of collapse as shops and restaurants close, flights and hotel bookings are canceled, and businesses shift to remote working. Often the first to lose their jobs are those whose employment was already precarious – sales clerks, servers, kitchen staff, baggage handlers, and cleaners.
A 3-month lockdown could see the deficit swell to a few hundred billion in the current fiscal year of GDP and potentially briefly push a national debt above 100% of output, according to economic watchdogs. Another option is to allow growth and inflation to shrink the debt burden and increase taxes on wealth. It is a shared secret that if a government wants a return to economic growth, it is necessary to financial spending or to implement unprecedented expansionary fiscal and monetary policies, which are essential to prevent the current headlong downturn from becoming a prolonged recession. For instance, one possible avenue is to follow through on infrastructure investment, helping boost productivity and growth in different regions of a country. This perspective means focusing on getting a complete recovery with one healthy output before worrying about debt.
Layoffs spell catastrophe for millions of families in a world where only one in five people are eligible for unemployment benefits. Because paid sick leave is not available to many carers and delivery workers – those we all now rely on – they are often under pressure to continue working even if they are ill. In the developing world, piece-rate workers, day laborers, and informal traders may be similarly pressured by the need to put food on the table. We will all suffer because of this. It will not only increase the spread of the virus but, in the longer term, dramatically amplify cycles of poverty and inequality.
Thus, after all this, we will probably go back to a world of austerity, which is what we experienced in 2010.
The six most seriously locked down countries are the US, the UK, Spain, France, and Germany. All six of them account for 4% of the world’s population. These countries have higher GDPs, therefore more international travel and more people passing through borders. However, there will not be any travel since they are all in lockdown.
According to IATA, 80% of flight capacity remains idle. IATA suggests that the recovery will be a tortuous one. Given the financial impact and safety measures likely required, it could be up to three years before the industry sees a sustainable revival, according to Delta Airlines’ CEO. State aid and bailouts will hurt the economy’s recovery, while the cut-up of thousands of jobs in conjunction with the share price fall will be echoed into 2-3 years for the industry’s recovery.
The world is eager to come out of the lockdown. But if countries return to business as usual, new outbreaks of Covid-19 might follow. The only solution that health experts see is to keep careful track of the CV and clamp down on further flare-ups. The current tracking has already proved to be a vast and expensive challenge. In contrast, experts say that we are nowhere near the scale, and we need to get a better picture of the pandemic’s impacts.
According to the banking group UBS, tourism revenues fell by 95% in Italy and 77% in Spain in March. Across southern Europe, where recovery from the 2008 crisis relied significantly on tourism, the sector is vital to national economics. According to the World Bank, it accounts for 20% of the GDP in Greece, 18% of Portugal, 15% of Spain, and 13% of Italy. Holidays in other EU countries are not yet possible for German Chancellor Angela Merkel, who said bluntly a couple of days ago. Specifically, Germany extended a warning against foreign travel internationally in mid-June. France’s Prime Minister said it would “not be reasonable to imagine traveling very far aboard very soon,” and Spain’s foreign minister said the country would gradually reopen to tourism, but not until “we are in a position to guarantee tourists’ safety. For Greece, the issue of the tourist economy is existential. More than a fifth of their workforce is employed in the tourist sector, almost double the EU average, and tourism is the single most significant contributor to their economies. The most crucial issue for restarting the tourism economy, except finding a vaccine, is establishing a standard travel protocol to avoid confusion about different countries having different rules, as stated by the Cypriot deputy tourism minister. The Italian national tourism agency forecasts a 29 billion Euro fall in income compared with 2019.
Greek financial models have over-indebted us, bankrupted us, and burdened us with three official bailout programs. Precisely, it is estimated that the Greek economy will have less revenue (about 3.95 billion euros) while spending will increase (about 14 billion euros). With regards to the gross public debt of 356 billion Euro at the end of 2019 and the budget deficit of about 10 billion Euro, the gross debt to GDP of 178.7 billion Euro will be 204% of GDP. Therefore, it becomes evident that the Greek Government’s projected growth of 5,1% for 2021 will not happen.

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