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Corona virus in Europe: Virus eat up economy

2020-02-27T00:33:42.368Z

The epidemic has reached Europe. It drives politics into a dilemma: the more resolutely it protects citizens, the harder it hits the economy.



It seemed ghostly when Giorgio Armani held his fashion show at Milan Fashion Week last Sunday. Instead of in front of an audience, the models had to run in a hall without spectators. The show in front of empty chairs was broadcast into the world via live stream, because Armani did not want to invite this world to his country. That seemed too dangerous to him since the corona virus reached Italy and spread rapidly in the north of the country. More than 300 people are already infected, and there were eleven officially confirmed deaths by the time this issue went to press on Tuesday evening. The number of sufferers is increasing steadily, most recently the first cases in southern Italy and Austria were added. Further infections in Germany were also reported on Tuesday evening.

Italian politics reacted unexpectedly radically to the outbreak. The authorities sealed off smaller communities, the Venice Carnival was canceled, universities, schools and theaters remain closed in Milan. The virus is still not under control.

The panic of the virus spreads even faster than the corona virus itself. Not just the fear of infection, but also that of the economy. On Monday and Tuesday, stock market prices fell around the world due to the virus, including in Germany. In Northern Italy you could see what was last known from the financial crisis: long lines of people waiting. This time, however, they were not in front of banks, but in front of supermarkets. People didn't want to hoard cash, they wanted pasta and rice - out of concern that there would soon be no more supplies.

Confidence is waning as a result of the virus, and large companies are also noticing this. For example, the car maker Audi. Its subsidiary Italdesign learned about a sick person among its employees in the province of Piedmont on Sunday. "Italdesign's management immediately decided to close all Italian locations until further clarification of the situation," the parent company Volkswagen told ZEIT .

How this could go on can be seen in China. There, the corona virus has almost completely brought the local economy to a standstill. Factories came to a standstill, business trips were banned or so high that nobody could take them on. This has also hit German companies, some of which work closely with China.

A ZEIT survey of Dax companies found that almost all of the 30 companies are affected by the outbreak of the corona virus in China in some way. Be it because production facilities are temporarily closed, be it because individual employees are ill or because the companies simply sell less. Adidas, for example, has closed many stores in China. As a result, the Group has made 85 percent less sales there since the Chinese New Year than in the previous year. Car sales in China slumped by 20 percent in January, which should hit Volkswagen in particular: the group sells 40 percent of its vehicles there.

In the ZEIT survey, only a few of the Dax companies indicated that they did not experience any coronavirus effects. Only one of them could even imagine a slightly positive effect on their own business: the payment processor Wirecard, which benefits when transactions are transferred to the Internet.

The corona virus hits the German economy - for the second time at an unfavorable time. The first time was at the beginning of the year. There were actually signs of recovery after a month of industrial recession in the country. The mood in the companies improved and the number of orders increased. Then the pathogen got out of control in China - the country that is so important for German industry. So now for the second time: There are increasing signs that the situation in China could improve again. Production started again in many places. The virus arrives in Europe.

It's tough for companies. But is it also hard for the German economy? So is it just a matter of a few weeks less sales and production that will be caught up later? Or does the virus damage the economy structurally and in the long term?

Until a few days ago, this race virus against economy seemed at least open. The International Monetary Fund (IMF) lowered its forecasts last week. The researchers there now expect the global economy to grow by 0.1 percentage points less than previously forecast due to the corona virus. That would not be worth mentioning. The finance ministers and central bank heads of the world's leading economies were also not very alarmed when they met this weekend in the Saudi Arabian capital of Riyadh. The situation will be "observed" and, in the event of an economic downturn, it is ready to "take further action", the final declaration said.

Panic sounds different.

Source: zeit

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