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October 1, 2020

Europe

EUROPE: Managing the pandemic – what we are watching

BY Andrius Tursa

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( 5 mins)

This updated weekly piece provides snapshots of how selected European governments are dealing with the ongoing Covid-19 pandemic. Please do not hesitate to contact us if you want to discuss any of the countries mentioned in more detail.

Graph of the week

EUROPE: Managing the pandemic – what we are watching 1

Spain

  • With daily national cases still above 12,000, the central government has issued a decree imposing additional free movement restrictions in areas with more than 100,000 residents and infection rates above 500 per 100k people. The Madrid region has said it would implement the decision but also challenge it in the courts.
  • As expected, the government, employers, and trade unions have reached an agreement to extend the state-sponsored furlough scheme until 31 January. The deal will maintain unemployment support at 70% of the worker’s salary.
  • Far-right party VOX has officially filed a no-confidence motion against the government of Prime Minister Pedro Sanchez. The vote, which will probably take place in mid-October, is highly unlikely to be successful as no party other than VOX seems willing to support it.

France

  • The seven-day rolling average of cases remains above 11,000. The closure of bars and restaurants in Marseille and its surrounding region has led to a backlash from the local authorities and protests against the central government’s decision. Despite the demonstrations, the administration of President Emmanuel Macron is likely to continue relying on localized restrictions to contain the virus.
  • The government has decided to extend the state-subsidized short-term employment scheme for sectors particularly affected by the fallout from Covid-19 until the end of the year.

Italy

  • The government is likely to extend the nation’s state of emergency to help it tackle the pandemic, possibly until 31 January 2021. The current state of emergency, which is due to expire on 15 October, was already extended from its original end date of 31 July, despite objections from the opposition, who accused premier Giuseppe Conte of trying to keep too much power.
  • The update to the Economic and Financial Document, which forms the framework of the 2021 budget, is expected to be endorsed by the cabinet on 4 October. According to the Treasury, Italy’s economy will shrink 9% this year and then rebound 6% in 2021. The budget deficit will reach 10.8% of GDP this year and 7% of GDP in 2021. Over-optimism in official forecasts is an established tradition in Rome.
  • The Five Star Movement is in deep turmoil after its poor showing in the recent regional elections. The party seems set on a slow but potentially irreversible decline that will limit the government’s room for maneuver and overall ability to tackle the country’s deep economic malaise.

Germany

– The daily number of new infections keeps hovering around 2,000 cases, pointing to a worsening pandemic backdrop, albeit at a slower pace than elsewhere in Europe.

– Despite pressure from Chancellor Angela Merkel, the 16 regional state leaders did not agree on Germany-wide upper limits for public and private events; they merely defined joint thresholds for events in areas with regional outbreaks.

– Presenting a 2021 budget that entails EUR 96bn in new borrowing, Merkel urged for a return to the constitutional “debt brake” as soon as possible — but without committing to time frames (which will reach beyond the end of her chancellorship in late 2021 anyway).

United Kingdom

  • New infections remain at around 7,000 daily cases, indicating that the government’s latest calls for greater caution have not yet had any major effect.
  • At the same time, the government had to give in to Tory rebels, promising to hold parliamentary votes ahead of any new, nationwide lockdown measures; the episode underlines the Conservatives’ continued problems with agreeing on a coherent crisis-fighting course.
  • The prime minister has vowed not to hesitate and pass new measures to get the virus under control; if this were to happen, this would pose an immediate test for government plans to replace the furlough system with a wage subsidy scheme.

Czech Republic

  • The seven-day rolling average of new cases and deaths from Covid-19 in the Czech Republic remains among Europe’s highest when adjusted for population. The government is re-introducing the state of emergency as of Monday, 5 October, which will result in school closures in high-risk areas, and a greater limit on public gatherings and events.
  • Despite a difficult epidemiological situation, elections to the regional councils and parliament’s upper house remain scheduled for 2-3 October. The growing discontent over the government’s handling of the pandemic might negatively affect the performance of the ruling Action of Dissatisfied Citizens (ANO) in the regional poll.
  • Parliament is expected to adopt the “Kurzarbeit” scheme for employers, which will subsidize 70% of furloughed employees’ salaries for up to one year starting 1 November.

Poland

  • The average number of new cases per day increased by nearly 66% to more than 1,400 during the past week. In response, the government is tightening the face-mask regime in the affected zones and restricting public gatherings and the opening times of gastronomic facilities to 10pm. Passenger flights to 29 countries, including the US, are banned until 13 October.
  • Following reports of bed shortages in some regions, the ministry of health informed that only 2,300 of around 8,000 hospital beds for Covid-19 patients are occupied nationwide.
  • The government is introducing new economic support measures for the tourism industry. These include parking benefits and a three-month exemption from social security contributions.

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