Europe’s Economic Revival Is Imperiled, Raising the Specter of a Grinding Downturn

As the coronavirus regains force, economists fear that Europe’s tentative recovery is at risk from traditional political concerns.



By Peter S. Goodman and Liz Alderman

Europe was supposedly done with political histrionics. In the face of the pandemic, a continent not known for common purpose had put aside long-festering national suspicions to forge a collective economic rescue, raising hopes that a sustainable recovery was underway.

But the European revival appears to be already flagging, and in part because of worries that traditional political concerns may disrupt economic imperatives.

The European Central Bank — which won confidence with vows to do whatever it took to stabilize the economy and support lending — has been hesitant to reprise such talk, sowing doubts about the future availability of credit.

National governments that have spent with abandon to subsidize wages and limit layoffs are wrapping up those efforts, presaging a surge of joblessness.

And in the midst of the worst public health emergency in a century, twinned with the most severe economic downturn since the Great Depression, the British government has opted to unleash a fresh crisis: It has sharply escalated fears that it may follow through with years of bellicose threats to abandon Europe without a deal governing future commercial relations across the English Channel.

A chaotic Brexit would almost certainly worsen Britain’s already terrible economic downturn while also assailing major European trading partners like the Netherlands, France and Spain.

Collectively, these developments have crystallized fresh worries that Europe could find itself mired in bleak economic circumstances for many months, especially as the virus regains strength, yielding an alarming increase of cases in Spain, France, and Britain.

“It’s hard to imagine a recovery that’s going to be strong and sustained given the current situation,” said Ángel Talavera, lead eurozone economist at Oxford Economics in London. “There’s not a lot of engines of growth.”

A new Oxford Economics tracking model shows that commercial life in the 19 nations that share the euro currency bounced back sharply in July and much of August, before activity slowed again in recent weeks.

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