Coronavirus Endangers Europe’s Economic Locomotive

Coronavirus Endangers Europe's Economic Locomotive

© dpa / AFP / Archives – Silas Stein

First hit by declining industrial sales to China, Germany is now hit hard by the economic impact of the coronavirus. While it has only registered two deaths, it is already suffering from a severe drop in orders for cars and a halt to its tourism and leisure industries. And on Monday March 9, the Frankfurt Stock Exchange plummeted. The Dax has collapsed.

Germany has so far recorded only two coronavirus-related deaths (compared to 30 in France and 463 in Italy). And yet, for two weeks the Frankfurt stock market has been panicking and yesterday, Monday March 9, the DAX plunged by almost 8%. “40 billion euros gone up in smoke”, alarmed in stride the site of the weekly Focus. In the evening, Tagesschau, the television news, had dramatic accents, pointing to “a black Monday”, “a bloodbath”, “the fear of a world recession”, while the economists of Commerzbank Research warned before “The risks of a global pandemic”.

This Tuesday morning, March 9, the German press, specialized, as a general practitioner, is worried about “a German economy infected by the Coronavirus”, of “the greatest danger for the economy since the financial crisis. “

Auto exports down

In fact, since January, the locomotive of Europe has entered a zone of turbulence, first struck by the impact of the Covid-19 in China, very deleterious for its exports, now threatened by the epidemic on the Old Continent. “Supply chains are already threatened and major problems are inevitable”, analyzes the eeconomist star Marcel Fratzscher, President of the DIW Institute in Berlin. For the expert, “the production processes and therefore economic performance will inevitably suffer.” he anticipates a particularly negative impact for Germany: “Because our country’s economy is much more dependent on trade than most other European countries”.

Spearheading overseas sales, the auto industry has been suffering from declining orders for more than two months. 1er March, the Ifo Institute in Munich noted: “The German auto industry is preparing for tough times. Our cyclical survey shows that the demand index for this sector fell from -2.1 points in January to -11.8 points in February. Expectations for exports also fell from -5.2 points in January to -15.4 points in February. “

Lufthansa has canceled half of its flights

Even if no overall forecast on growth has yet been made, the worst remains undamaged to come with the possible collapse of the German internal market, accelerated by the concern of the population which, last week, devalued paper stocks hygienic in supermarkets … Already Lufthansa has canceled half of its flights, the tourism industry recorded a drop in reservations from 17 to 25%, which will represent a shortfall of at least 2 billion this year nothing only for Chinese tourists. And the health minister’s recommendation on Sunday, March 8, to cancel the rallies of more than a thousand people risks collapsing the leisure and sports industry. Thus, if the German football league organizes matches without spectators, it anticipates dead losses of almost 100 million euros in the coming weeks. As for the major fairs, they have been canceled, notably the Berlin tourism fair.

Support measures for the economy

Yesterday, March 9, after an emergency meeting and after very long hours of discussion, the Angela Merkel’s coalition government announced measures to support the economy. Easier recourse to “Kurzarbeit”, partial unemployment, in companies – a mechanism which proved to be effective in 2009-, the granting of short-term loans in the event of cash flow difficulties and over the next four years a envelope of 12.8 billion euros. “Finally the state is helping!” “, Reacted the weekly die Zeit, even if he wondered “will this first salvo be enough? Another question that haunted the press across the Rhine: “What will Lagarde do this week? We are awaiting announcements from the European Central Bank. This Tuesday morning, all eyes are on Frankfurt: on the stock market today and on the ECB in the days to come.


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