How are we doing on the economic recovery front?
The EU finance ministers were unable to settle the dispute over the EU's Covid recovery fund at their virtual summit on Tuesday. In the meantime the European statistics office Eurostat has announced that economic output in the Eurozone dropped considerably in the first quarter, but less dramatically than expected. Commentators examine the outlook and make proposals for reviving the economy.
Like looking into a crystal ball
The uncertainty is too great for accurate economic forecasts, the Neue Zürcher Zeitung explains:
“ John Kenneth Galbraith once said that the only function of economic forecasts is to make astrology look respectable. Rarely has that statement been more true than it is these days. The economic uncertainty is so great that any look at the future seems to be mere speculation. ... According to the OECD it will be a long time before the economy returns to its pre-crisis level. ... If economic forecasts are indeed related to astrology, one would have to describe this as a very sad horoscope. But above all one would have to hope that the economists' level of accuracy is as poor as that of the astrologers.”
Coupons more effective than cash injections
Europe's governments should follow the example of Chinese local governments in their efforts to stimulate demand, advises economist and Nobel Prize winner Joseph Stiglitz in The Irish Independent:
“Much of the money that households and businesses receive in the form of stimulus cheques will probably sit idle in their bank accounts owing to anxieties about the future and a broader reduction in spending opportunities. ... Governments should consider issuing spending vouchers to stimulate household consumption. This is happening in China, where local governments across 50 cities are issuing digital coupons that can be used to buy goods and services within a certain time frame.”
Fair competition instead of aid
Aivar Hundimägi, editor of business newspaper Äripäev, warns on the website of Estonian public broadcaster Eesti Rahvusringhääling that companies should not get too used to state aid:
“One hears many Estonian entrepreneurs demanding support from the state. In this shower of aid measures, however, the state must not lose a critical perspective and must ensure that the aid is used as intended. ... What the economy needs is not aid but equal opportunities, honest competition and investments in the public sector for which everyone can apply. In the worst case, direct aid to businesses prevents the renewal of the economy, wastes limited resources on misguided objectives, distorts competition and robs the market economy of its vitality.”
Even the optimists are pleasantly surprised
The Aargauer Zeitung is confident that the economy will soon pick up again:
“The crisis is far from over. As long as there is no vaccine, people and the economy will remain vulnerable. In many sectors layoffs could occur when the furlough schemes come to an end. And what do we do if the financial stimuli provided by states and central banks start losing their potency? The risks remain considerable. Nevertheless, we can already observe that the recovery is faster and stronger than even the optimists had expected a few weeks ago. The origins of the current recession were unprecedented. And it may well be that the same applies for the recovery.”
Mass layoffs would be counterproductive
Surveys among Czech companies show that they have learned from previous crises, Hospodářské noviny states:
“Czech entrepreneurs have not forgotten the lessons of the last crisis and the ensuing economic period, which led to a massive shortage of qualified employees. ... Today, experienced employees are important to them, so layoffs should be kept on a moderate scale. ... Keeping important teams together is a competitive advantage. State aid is indispensable for this. Extremely low interest rates, which 'sweeten' debt for consumers and companies, also play an important role. Manufacturers who don't lose 'muscle and brain' in a crisis are at an advantage.”
Seize the corona opportunities
Lithuania's regional autorities should seize the opportunities arising from the coronavirus crisis, Greta Ilekytė, an economist at Swedbank Lithuania, advises in Verslo žinios:
“It may sound paradoxical, but the current crisis represents a unique opportunity for many regions. With growing scepticism about globalisation and the goal of making supply chains as simple as possible, many European companies will shift their production to closer locations. Lithuania, where salaries are still below the Western European average, could become a target for investors. However this will also require more energetic action on the part of the state to ensure better conditions for investors. ... The role of local governments and local economic and community actors is also important, as is their enthusiasm and initiative.”