Why Omicron threatens the recovery

Audio 04:18

A Covid-19 screening center, in New York, November 29, 2021 © REUTERS / Brendan McDermid

By: Dominique Baillard Follow

4 min

Will the Covid-19 and its new version, Omicron, overthrow the economic recovery?

This is the question that haunts Western rulers.

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A first Omicron case was detected in the United States, in California, but Europe is the most affected; Norway was in turn caught up yesterday, Wednesday December 1, by this worrying variant. Leaders everywhere are taking increased vigilance to detect, contain and isolate new cases of Covid Omicron. Border testing is being stepped up and vaccination may soon be made compulsory in some countries. After Austria, Germany is thinking about it very seriously. Commission chairwoman

 before each Member State decides at national level.

This morning, the Asian stock markets, the first to open, are trending downward, in the wake of the closure of Wall Street, panicked by the announcement of the first American case.

Yesterday, the chief economist of the OECD warned: the variant poses a risk for the recovery

According to Laurence Boone, it could worsen the imbalances that the economies are already suffering from. Imbalance in supply which penalizes manufacturers. The OECD estimates that the countries very involved in the automobile, Germany, the Czech Republic, Mexico and Japan, are already seeing their GDP contract because of the shortages. There is also an imbalance in access to vaccines between the north and the south. On this question, the WHO makes a harsh judgment: the inequalities in the vaccination campaign and the lightness of the tests form a toxic cocktail that is fueling the rebounds of the pandemic. The withholding of vaccines practiced by laboratories and rich countries is counterproductive, it is a danger for public health and of course for the economy. Laurence Boone shares this analysis, she emphasizes thata global vaccination campaign costs 50 billion dollars, while the support to economies during the two years of pandemic that we have just experienced amounts to 10 trillion dollars.

If Omicron turns out to be as dangerous as it is feared today, will it be necessary to refine?

Germany should announce today not containments, but the closure of public places such as cafes.

New confinements would be catastrophic for the tourism and transport industries;

according to the Reuters agency Air France KLM could postpone its capital increase planned to repay the aid received, because of the new context of travel restrictions.

Difficult to raise money when the barometer of activity is down.

Containment could also exacerbate demand for household appliances and at the same time amplify tensions in supply chains.

Clearly fueling the surge in prices.

Most analysts share Laurence Boone's fears and fear that inflation will set in permanently under Omicron's favor.

Faced with this threat, central bank bosses will have to act, by raising rates, that is Jay Powell's intention in the United States.

While waiting for this perilous turn, the central banks are defending their currency to mitigate the rise in prices, a reaction not without risk, it could revive the exchange war.

IN SHORT 

► The World Bank is ready to release 280 million dollars for Afghanistan. World Bank flows have been frozen since the Taliban came to power. This decision is welcome for a

by the collapse of the economy. The money must still be able to circulate, humanitarian aid is exempt from American sanctions but the banks fear exposing themselves to the wrath of the American gendarme, hence the difficulties in delivering the promised aid.

► In Turkey, the finance minister was thanked last night, he was one of the last to stand up to President Erdogan again.

A

, which is currently 20% in Turkey.

However, it is the reverse that is recommended, they must be noted.

Recep Erdogan does not care, the rates are regularly reduced, hence the plunge of the Turkish lira, since the beginning of the year it has lost 40% of its value against the dollar.

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