It was the beginning of 2020 when I rang the alarm bell in my previous articles (see HERE and HERE) about an impending global financial crisis, the difficulty of absorbing the crisis by the Greek economy along with its growing non-sustainable public debt. No one could have imagined or predicted what followed. Even world-renowned scientists, economists, think tanks that advise politicians, deal with the analysis of trends and geopolitical forecasts, did not expect or predict the rapid onset of the Covid-19 aggressive pandemic that led to perhaps the worst global economic and health crisis of the century in terms of magnitude and duration. Developed countries and their economies are in recession and as long as the vaccine is delayed, fiscal derailment continues, private and public debt is rising while not adequately discussed in the press. Although the consumption of many retail products has not been affected due to the fact that they are not easily substituted in times of crisis (inelastic), the services sector has shrunk. Global GDP is declining as forecasts and data show -8%, we are talking about trillions of dollars that will be lost or have already been lost for 2020 and 2021. Entire industries are stuck or are in bankruptcy, employment relations have changed irreversibly and a new era is dawning with many technological, social, political and economic challenges for the immediate future that concerns the whole world population. In developing countries where digital skills are lagging behind and the underground economy is a one-way option, those who have not switched to telework are at risk of remaining unemployed for long periods of time, while inflation in basic necessities will make living standards more difficult and poverty rising.
Total costs per country are difficult to determine because each country has different sectors that are affected differently with the rapid changes in global relations, global trade and commerce. The pandemic continues, re-igniting currently in several countries that have already gone through the first wave, as governments try to balance the situation with protecting public health vs. imposing measures to reopen markets. Mediterranean countries such as Greece are trying to boost tourism on which much of its annual GDP depends. Many proximity-based industries and businesses will henceforth operate with distancing and will inevitably remain in sub-operation, pause or shutdown, such as events, performing arts, travel and hospitality services (Airbnb platform and owners). We see that even more traditional sectors strategically important to the global economic activity such as shipping, have been hit as several countries in Asia still prohibit the change of marine personnel, sailors, due to the Coronavirus.
In all the countries affected by the Coronavirus, there is a decline in economic activity, the lives of citizens have changed dramatically as millions will suffer economic collapse, high unemployment, a reduction in the general standard of living and a radical change in labor relations. Former employment benefits and rights that were established for so many years, are now being revoked or revised.
Greece has been experiencing an unprecedented economic crisis for the last decade, with the result that the pandemic has deepened the structural, economic and social problems that afflict it and recent governments trying to correct. Undoubtedly, governments are not to blame for Covid19. As in 2007-2008 when the global financial crisis broke out, even now, Europe must always have ready and available in the European Commission and the bureaucratic policy decision centers in Brussels, risk management plans for crises and disruptions like the one the world is going through. These institutions should not be surprised when financial or health crises take place requiring huge sums of capital, funding and money for recovery. We live in an age of high uncertainty and the management of present and future crises must be high on the agenda of every government as well as at the European institutional level.
Government aid packages to citizens and businesses should help keep an economy afloat and boost national production, without these packages necessarily being new loans to countries that are already over-indebted with non-performing consumer, mortgage, business loans. Many economists around the world wonder who will pay the “bill” from the support funds that governments are ”throwing”, funds that recently decided by the EU for its Member States, aid packages, grants and low-interest loans that are being given and will be given in time to deal with the Coronavirus crisis. Who can guarantee that in 2022 or later there will be no high taxes and cuts in salaries and pensions again, in order to cover the deficits of government budgets as ordered by the fiscal stability agreement of EU country members, as well as to cover the increased deficits and expenditures that are currently 8% to 15% of GDP in euro area countries? If the recovery funds later become a potential trap and governments impose recessionary policies, they will negatively affect any economic growth generated by the support funds today and citizens will find it difficult to get their lives back on track.
Potential crises (climate, health, economy, etc.) must be addressed by reducing their influence before they even occur, and this can only be done if governments at national, European and global level are proactively working out plans and scenarios for economic, health, climatic effects of future events and crises. The creation of special funds to finance each economy in advance and adequately when a crisis is taking place is now a necessary measure regardless of whether we abstain from implementing it when specific member states of the European Union face solidarity and financial support, under a different context of understanding, application and interpretation.
The future of humanity will be determined by the steps we take today to shield economies, to design better social policies and institutional safety nets so that world leaders are oriented towards a better tomorrow, as the Coronavirus crisis has shown. for all people.
Economist / Business Consultant
Original article in Greek HERE
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