The Limited Times

Now you can see non-English news...

"Never has a recession been so deep," says journalist François Lenglet.

2020-04-24T10:43:30.437Z


The Covid-19 epidemic brought the global economy to a halt. Despite public aid, the damage will be numerous. The economic journalist


The numbers are piling up like black clouds over the global economy. Confronted with the health emergency, confined countries have brutally put an important part of their activity to sleep. Most stores have lowered the curtain, tourism has stalled, factories are slowing down and more and more employees are finding themselves inactive. In France, the government expects in 2020 a historic recession, with an 8% drop in gross domestic product (GDP) and a public debt of 115%. Far from the forecasts at the start of the year which anticipated growth of 1.3% and public debt around 98%.

Admittedly, the state has put its hand in the wallet to prevent the crisis from contaminating the whole system, but it will take months before the machine turns again at a good pace, and the accumulated debts will be difficult, even impossible , to be settled. "This crisis is not a matter of weeks, not a matter of months, but a matter of years", announced the Minister of Economy, Bruno Le Maire, on April 15. But it can also be an opportunity to review our production and consumption patterns.

Decryption with François Lenglet, economic journalist on RTL and TF 1.

What is the economic impact of the pandemic?

FRANÇOIS LENGLET. In all the countries that have opted for containment, economic activity has fallen on average by a good third. In France, INSEE estimated this decline at 35%. However, there are big differences between sectors. New technologies, e-commerce or the food industry are doing quite well when, conversely, car sales fell by 72% in March, Air France cut 95% of its flights and the industry in the whole works at 60% of its capacity.

Is this crisis comparable to that of 1929 and 2008?

There is a difference in nature between these events. In 1929 as in 2008, it was a financial crisis that caused the economic crisis. Today, the mechanics are the opposite. It is the health crisis that causes an economic crisis, which risks triggering a financial crisis. The result will be the same: a paralyzed economy and a struggling financial system. But, intensity question, the crisis we are going through is unprecedented. Never has the economy experienced such a deep and rapid recession in peacetime. GDP is expected to fall in 2020 by five to ten points in all affected countries. This figure will of course vary depending on the length of confinement, and the time it will take to find a treatment or vaccine.

“It pays me” newsletter

The newsletter that improves your purchasing power

I'm registering

Your email address is collected by Le Parisien to allow you to receive our news and commercial offers. Find out more

Help for low-income families and businesses… How Emmanuel Macron wants to support the economy

Unlike 2008, governments and central banks untied the purse strings very quickly ...

For the 2008 crisis, it took four years before Mario Draghi, then president of the European Central Bank (ECB), opened the floodgates. This time, everything was done in eight days. The ECB has announced that it will inject 750 billion euros into the economy. The French government has taken three major measures. He guaranteed loans to companies to the tune of 300 billion euros. It also activated partial unemployment, which already benefits nearly 10 million French people. And he decided to defer charges and taxes for companies.

Can these measures absorb the shock?

Yes. It is a way of instituting barrier gestures in economic policy, in order to prevent the bankruptcy of one company from contaminating others, and the system as a whole. But it is not certain that this will prevent a financial crisis and, ultimately, a monetary crisis.

What are the mechanisms that come into play?

In order to finance all this, the central banks are running the printing press. But it must be imagined that a good part of this aid, which amounts globally to 6000 or 7000 billion euros, will not be reimbursed. States will recover these debts and pass them to the central banks which will keep them under sarcophagus, like radioactive waste, hoping that it will hold until growth starts again. But it's fiction! When money creation is faster than growth in real output, more money is injected into the economy. Demand then increases for certain goods, so prices go up. The long-term risk is that this policy, taking into account the amounts involved, completely destabilizes the price system.

This massive aid marks a real break with the budgetary rigor which was the rule until then. Is this the start of a new era?

There is indeed little chance that we will go back. First, because we are on the verge of massive investment in the global health system. And then because people will say, "You released hundreds of billions of euros overnight, there are bound to be a few crumbs left. "It's magic money, out of nowhere! And once you've tasted magic money, it's hard to give it up.

Despite all these measures, will there be many business bankruptcies?

I fear it, especially in small structures. Independent clothing stores, hardware stores or food stores, which had already been knocked out by big chains and e-commerce, will have trouble recovering. Not to mention the restaurants, whose treasuries are often strained, which will remain closed beyond confinement. Some of these small businesses will not recover. For the big ones, like Air France or the car manufacturers, there will probably be nationalizations or state aid.

Since March 15, bars, restaurants and non-essential shops have been closed. A situation from which some may not recover. LP / Corentin Lesueur  

The economy is at a standstill. Don't its springs risk seizing up?

Indeed, if this shutdown lasts too long, skills can be lost, supply chains, broken ... In particular in complex organizations, such as aeronautics or certain segments of the automobile. In a car, there are spare parts from 35 different countries. It will no longer be possible to provide in this way in a period when globalization is shaken by the fear of contagion. We will have to reorganize completely.

Globalization therefore risks marking time?

For some years now, the need for protection has replaced the desire for freedom. This movement is at work for ideological reasons, and the virus comes to precipitate it. In this context, the border becomes a very important element. There will certainly be no complete closure of borders, but sanitary controls and quarantines will remain the norm beyond the period of confinement, and friction on international trade and the transport of people is bound to last.

Will this result in relocation of factories?

Producing locally will be the watchword for the coming years. The ecological constraint already invited us to do so, and the new health constraint is superimposed on it. We will have to find other supply chains, relocate certain factories, if not in France at least in Europe. Buy tombstones in China to have them cut in India and put them in Saint-Brieuc, it's over! We will probably pay more for our products, but we will manufacture them in France. With a positive balance for employment and the environment. And if we don't produce, we'll make stocks.

Finally, the virus will allow us to make this green conversion that we were slow to operate ...

It is possible, because our production methods will change. But there is also a downside to this. The virus is accompanied by an extraordinary digital push. And between computer servers, deliveries and electricity production, the digital carbon footprint is not always glorious. Nor should we believe that nothing will ever be the same again. Vuitton stores in China regained a considerable influx as soon as the containment was lifted. So much the better for Vuitton. But it shows that homo economicus is not completely transformed by the virus.

PODCAST. How the coronavirus is tipping the global economy into the unknown

Will this epidemic have other positive consequences for the economy?

We are going to witness a productivity boom. Businesses will have learned, during containment, to do more with less. In the short term, it may be bad for jobs. But history proves it, in the medium term, productivity revolutions are always beneficial. They make it possible to reduce everyone's working time, or even to increase wages.

Will the “small” trades come out of it upgraded?

This crisis makes us rediscover how essential these professions, often very badly paid - garbage collectors, cashiers, nurse's aides, deliverers ... - are to the functioning of the country. The social outlook changes. And that look indirectly determines a number of things. Like the hierarchy of values ​​and, therefore, that of wages.

Should we expect massive investments in health?

All countries will reinvest funds in their health systems. Pharmaceutical research on viruses will make a considerable leap. Medtechs, specialized in innovation, will develop at high speed. With the support of states and not only the private sector. And this movement will be global.

Source: leparis

All business articles on 2020-04-24

You may like

News/Politics 2024-02-02T23:49:42.762Z

Trends 24h

Latest

© Communities 2019 - Privacy

The information on this site is from external sources that are not under our control.
The inclusion of any links does not necessarily imply a recommendation or endorse the views expressed within them.