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EU’s Second Wave Of Shutdowns Threatens Recovery

COVID-19 cases are starting to spike in the United States and around the world — carrying with them a new wave of restrictions and shutdowns across Europe as leaders try to contain the virus.

Ireland and the Czech Republic are leading the way in being the first two European nations to return to full lockdown mode. Irish citizens have been advised to stay in as much as possible and avoid venturing outside a three-mile radius from their homes unless they need to shop for food. Nonessential shops have to close, and restaurants and cafés can only be open for takeout and deliveries.

Meanwhile, a Czech shutdown announced last week will last until Nov. 3 and will see all nonessential shops closed and “the free movement of persons throughout the Czech Republic … prohibited.”

Czech Prime Minister Andrej Babiš  has officially apologized for the measures — which, according to reports, he acknowledged “will make life uncomfortable for businesses, employees and our citizens.”

And while Ireland and the Czech Republic are the first out of the gate putting full lockdowns in place again, they’re far from alone in feeling the bite of Europe’s second wave of coronavirus. Other countries are putting restrictions in place to more firmly enhance social distancing in the hopes of heading off full shutdowns.

France had two days in a row this weekend of setting new daily records for COVID-19 infections, reaching more than 52,000 on Sunday. As a point of comparison, the United States had 84,000 confirmed cases on Saturday — a larger figure, but the U.S. population is five times larger than France’s. France is currently encouraging consumers to stay in, but reports indicate that a curfew and perhaps closures are coming later this week.

Italy has already closed bars and restaurants at 6 p.m., while in Spain, the government announced a state of emergency. That gives authorities greater ability to impose social distancing and emergency healthcare policies if the case count continues to climb.

Heading Off The Lockdowns 

European nations are loath to reimpose full-on lockdowns for fear of the likely extreme damage to their economies. And thus far, though cases are spiking, the number of deaths caused by the second European COVID-19 wave are a fraction of what they were in the pandemic’s early days.

The combined effect of earlier diagnosis and emerging treatment protocols are keeping the mortality rate much lower during the second phase, according to experts. That’s good news, but it is counterbalanced by the reality of limited capacity within hospitals and the fact that an explosion in cases could overwhelm national healthcare systems. Hospitals in major European cities like Paris and Madrid are already sounding alarms about unsustainable increases in their patient loads.

The hope now among government officials is that placing some limits on how, when and where people can socialize and shop will allow countries to bring infection rates down without strangling nascent economic recoveries.

But if case counts continue to rise and travel restrictions and curfews fail to slow the contagion, the popular opinion is that Europe will have no choice but to order full stay-at-home orders and close non-essential businesses.

The Economic Fallout  

Europe was successful at flattening the curve during the first pandemic wave with full lockdowns to keep people from encountering and thus infecting each other. However, the price was high as the continent experienced its worst economic contraction since the Great Depression.

Elected leaders across the continent would very much like to avoid trying to push more full shutdowns into place considering how pandemic-fatigued their citizens already are and how high a price they’ve already paid. But even the more limited curtailments being pursued now are having costs.

According to a study by McKinsey, more than half of Europe’s small and medium-size businesses (55 percent) are expected to go under within the next year if their revenues don’t improve markedly. Talking to SMB owners across France, Germany, Italy, Spain and the U.K., some 70 percent reported they had lost revenues as a result of the pandemic, with Italian and Spanish firms particularly hard hit.

Roughly 10 percent believed they would have to file for bankruptcy within the next six months, one in five was concerned they might default on loans and have to lay off employees and 28 percent feared they would have to cancel growth projects. And that rather dark outlook comes despite the fact that 20 percent of those surveyed had already taken advantage of various government assistance aimed at easing their financial distress.

Meanwhile, airline giant IAG — owner of British Airways, Iberia, and Vueling —  has officially scaled back its Q4 flight schedules by 35 percent, largely owing or lower-than-expected travel demand caused by restrictions.

“Recent overall bookings have not developed as previously expected due to additional measures implemented by many European governments in response to a second wave of COVID-19 infections, including an increase in local lockdowns and extension of quarantine requirements to travelers from an increasing number of countries,” CFO Stephen Gunning said.

That Europe’s spiking COVID-19 case load is a crisis-level problem is undeniable. Whether authorities can find a solution to bring it down without kicking off a new economic crisis remains to be seen. But SMBs across the continent need officials to come up with something — since they barely survived the first round and will almost certainly drown in a second.

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