{"id":171075,"date":"2020-05-25T11:36:27","date_gmt":"2020-05-25T15:36:27","guid":{"rendered":"https:\/\/www.countingpips.com\/?p=171075"},"modified":"2020-05-25T08:40:23","modified_gmt":"2020-05-25T12:40:23","slug":"europes-pandemic-dilemma","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2020\/05\/europes-pandemic-dilemma\/","title":{"rendered":"Europe\u2019s Pandemic Dilemma"},"content":{"rendered":"
May 25, 2020<\/div>
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By Dan Steinbock <\/b><\/strong>
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– In the ongoing battle against the global pandemic, belated responses will result in huge human costs and massive economic damage. In Europe, losses are climaxing in the 2<\/b><\/strong>nd<\/b><\/sup><\/strong>\u00a0quarter of 2020. <\/b><\/strong><\/p>\n

Before advanced economies \u2013 including those in Europe – began to flatten the epidemic curve, they fattened<\/i><\/em>\u00a0it for 6-8 weeks. These COVID-19 delays will prolong the global pandemic and cause secondary waves of imported infections and residual clusters both in Europe and worldwide (for the full story, see my report on the historical COVID damage: https:\/\/www.differencegroup.net\/coronavirus-briefs<\/u><\/a>\u00a0).<\/p>\n

In the United States, the Trump administration’s futile effort to \u201cprotect the economy\u201d (read: the markets) backfired disastrously. The European Union was more willing to battle the virus but was unable to do so proactively because it lacks the needed common institutions for effective response.<\/p>\n

As the consequent political backlash will soon wash across Brussels and the continents major capitals, the EU federalists are likely to demand “more integration” to deter past policy delays in the future. In contrast, the advocates of sovereign states will insist on “less integration” to overcome the EU’s institutional deficiencies.<\/p>\n

The current status quo \u2013 sub-optimal integration that undermines both the bloc\u2019s and the sovereign states\u2019 effective responses \u2013 is ridden with pitfalls.<\/p>

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Late mobilization in the euro area<\/b><\/strong><\/p>\n

On January 25, 2020, the European Centre for Disease Prevention and Control (ECDC) was still painting a fairly rosy picture about the virus spread: \u201cEven if there are still many things unknown about 2019-nCoV [coronavirus], European countries have the necessary capacities to prevent and control an outbreak as soon as cases are detected,” it reported.<\/p>\n

Yet, inadequate EU preparedness involves not just its small virus-alert agency, but delays at the highest levels of EU institutions.<\/p>\n

In Brussels, the full continental response took a few days even longer than in the U.S., although some member states had been more proactive, and the most affected countries had to mobilize earlier.<\/p>\n

On March 10, 2020, when Italy already had 9,200 confirmed cases and over 460 deaths, its EU ambassador Maurizio Massari pled for help. Just days later, Italian Foreign Minister Luigi Di Maio hailed the arrival of a Chinese plane loaded with medical equipment and doctors to help fight the coronavirus. “Many foreign ministers offered their solidarity and want to give us a hand … [and yet] the first aid arrived from China” said Di Maio in a pointed rebuke to the EU.<\/p>\n

Subsequently, many European observers and policymakers suggested that Chinese aid efforts were a sinister ploy to divide Europe. What they set aside was the question why Brussels and individual European economies failed Italy at the time of its greatest need.<\/p>\n

When the EU mobilization finally began \u2013 another two weeks after Massari\u2019s pleas – the number of cases in Italy had soared tenfold, while the deaths had tripled.<\/p>\n

6-8 weeks of delays<\/b><\/strong><\/p>\n

As part of the EU\u2019s joint response to the COVID-19 outbreak, the European Parliament almost unanimously adopted three urgent proposals in an extraordinary plenary session, on March 26, 2020. Now Brussels hoped to mobilize up to \u20ac37 billion to support national health care systems, SMEs, labor markets and other vulnerable parts of its member economies. The EU also extended the EU Solidarity Fund to cover public health emergencies. The measures would make up to \u20ac800 million available for European countries in 2020.<\/p>\n

However, the \u201curgent\u201d proposals followed two months after<\/i><\/em>\u00a0multiple first cases in Europe and the WHO\u2019s international emergency alert; that is, after 250,000 recorded cumulative cases and more than 14,000 cumulative deaths.<\/p>\n

Although the European CDC had virus information after the first week of January, as did China, Hong Kong and Singapore, Brussels did not respond proactively. Nor did the EU take a stronger preemptive stance between the 1st<\/sup>\u00a0week of January and the 30th<\/sup>\u00a0day, when WHO chief Tedros declared the international emergency.<\/p>\n

What\u2019s even more distressing is that Brussels chose not to mobilize between January 30 and March 10, when the WHO declared the global pandemic. Instead, effective mobilization began only toward the end of March, which virtually ensured the extraordinary and protracted human costs and economic damage (Figure<\/b><\/strong>).<\/p>\n

Figure \u00a0\u00a0Human Costs of Coronavirus Complacency*<\/b><\/strong><\/p>\n

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*<\/i><\/b><\/em><\/strong>\u00a0<\/i><\/b><\/em><\/strong>Confirmed COVID-19 cases worldwide through May 23, 2020<\/i><\/em><\/p>\n

Source: WHO, Difference Group.<\/i><\/em><\/p>\n

 <\/p>\n

European Commission President Ursula von der Leyen acknowledged that \u201cthe EU was not ready when the pandemic first began sweeping the continent, and member states did not offer enough support to hard-hit Italy.”<\/p>\n

Despite the economic damage, the European Commission, as President Trump in the U.S., hoped to introduce early \u201cexit strategies\u201d to the lockdown measures, especially after Austria and Denmark announced plans to ease restrictive measures. After pressure by member states, the EC was forced to delay plans for exit.<\/p>\n

Following the belated virus response, premature opening would have resulted in still another disaster.<\/p>\n

Costs of complacency <\/b><\/strong><\/p>\n

Due to the belated response, prior efforts at fiscal support measures proved soon inadequate. So, by late April, European leaders gave Brussels green light for a huge \u20ac1 trillion stimulus package to ease the EU\u2019s recovery from the coronavirus crisis.<\/p>\n

However, markets are struggling. By year-end 2019, the Euro Stoxx 50 had recovered from 2,200 in 2012 back to 3,800; now the index is still hovering around 2,900. Despite mounting human costs and economic damage, the European Central Bank (ECB) responded only after its \u201cemergency meeting\u201d on March 18, 2020; that is, after 75,000 recorded cases and 11,000 deaths in Europe. That\u2019s when the ECB moved ahead with large asset purchases and a new round of quantitative easing, while interest rate stayed at the zero-bound.<\/p>\n

The delays in Brussels penalized severely the euro area\u2019s annual GDP growth rate. In the 1st<\/sup>\u00a0quarter in 2020, the bloc\u2019s economy plunged -3.3% from a year earlier. But that was just a prelude to the expected carnage of -14.7% in the 2nd<\/sup>\u00a0quarter.<\/p>\n

Today, there were 2 million recorded cases and some 175,000 deaths in Europe. And by the 2nd<\/sup>\u00a0quarter, the cases could climb to 2.4-2.7 million and deaths up to 225,000-235,000, respectively. These recorded losses <\/i><\/em>are just a fraction of real losses. Without vaccination and therapies, the human costs will climb until the epidemic curves normalize, earliest by 2021.<\/p>\n

After a disappointing start, Europe\u2019s collective response to the coronavirus crisis was the \u201cmost impressive anywhere in the world\u201d, said European Commission President Ursula von der Leyen in mid-April. Since the statement followed almost quarter of a year of missed opportunities, the self-congratulatory tone was not warranted.<\/p>\n

This is the short version of an essay released by The European Financial Review<\/u><\/a>\u00a0(June\/July), based on Dr Steinbock\u2019s COVID-19 report<\/u><\/a><\/p>\n

About the Author:<\/i><\/em><\/strong><\/p>\n

Dr. Dan Steinbock is an internationally recognized strategist of the multipolar world and <\/i><\/em>the founder of Difference Group. He has served at the India, China and America Institute (USA), Shanghai Institutes for International Studies (China) and the EU Center (Singapore). For more, see <\/i><\/em>https:\/\/www.differencegroup.net<\/i><\/u><\/em><\/a><\/p>\n

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 <\/p>\n","protected":false},"excerpt":{"rendered":"

By Dan Steinbock – In the ongoing battle against the global pandemic, belated responses will result in huge human costs and massive economic damage. In Europe, losses are climaxing in the 2nd\u00a0quarter of 2020. Before advanced economies \u2013 including those in Europe – began to flatten the epidemic curve, they fattened\u00a0it for 6-8 weeks. These […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-171075","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/171075","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=171075"}],"version-history":[{"count":1,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/171075\/revisions"}],"predecessor-version":[{"id":171077,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/171075\/revisions\/171077"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=171075"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=171075"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=171075"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}