Europe’s social welfare net shows signs of wear from virus

Published 10:22 am Friday, May 29, 2020

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Associated Press
PARIS (AP) — Europe’s extensive social welfare net is showing signs of fraying under economic strain from the coronavirus, as protests erupted for a second day in Spain Friday against layoffs by French carmaker Renault, while Italy’s chief central banker warned that “uncertainty is rife.”
Further afield, while New Zealand had all but eradicated the coronavirus with just one person in the nation of 5 million known to be still infected, developments elsewhere were generally grim. India reported another record increase in cases and Pakistan a record number of deaths.
As cases steadily rise across Africa, too, officials who are losing the global race for equipment and drugs are scrambling for homegrown solutions.
In the first major increase since it started gradually reopening May 11, France reported more than 3,000 new daily virus infections. It was not immediately clear if the spike was due to a greater availability of testing.
In the U.S., the virus threw more than 2 million people out of work last week despite the gradual reopening of businesses, stoking fears it is doing deep and potentially long-lasting damage to the world’s largest economy.
The latest job-loss figures from the U.S. Labor Department bring to 41 million the running total of Americans who have filed for unemployment benefits since the coronavirus shutdowns took hold in mid-March.
Strong safety-net programs in many European countries are underwriting the wages of millions of workers and keeping them on the payroll instead of adding them to the ranks of the unemployed. But the limits are starting to show.
In Britain, Treasury chief Rishi Sunak is expected to tell employers that starting in August, they’ll have to share the costs of a program that has effectively placed furloughed workers on the government payroll.
Sunak says the government can’t pay indefinitely for a program that has cost 15 billion pounds ($18.4 billion) to cover 80% of wages of some 8.5 million people. It is in place until October, although the final months will require employer input.
Even as it seeks a government loan from France, struggling carmaker Renault announced 15,000 job cuts worldwide as part of a 2 billion-euro cost-cutting plan over three years, as demand for cars has plunged around the globe.
Renault said nearly 4,600 jobs will be cut in France and more than 10,000 in the rest of the world.
That had a knock-on effect in Spain, where Nissan is rolling back production in a move Madrid said would mean 3,000 direct job cuts and risks as many as 20,000 additional jobs in the supply chain.
Spanish workers took to the streets for a second day to protest the closure of three Barcelona plants. Hundreds of workers have surrounded at least four of Nissan’s car dealerships in or around the northeastern city, covering their windows with leaflets reading “Nissan betrays 25,000 families” and “We will keep fighting” among others.
The governor of the Bank of Italy, Ignazio Visco, in his annual address, said Europe’s fourth-largest economy could contract by as much as 13% this year under a pessimistic scenario that foresees a “magnitude” drop in world trade and an intense deterioration of financial conditions.
“Today uncertainty is rife, not only about the course of the pandemic but also about the repercussions on behavioural patterns, on consumption and on investment decisions,” Visco said, adding that “after the pandemic wanes, the world will be a different place.”
How different will depend on how leaders manage falling employment, lower consumption and the prospect of social unrest, he said.
In New Zealand, health authorities have not found any new virus cases for a week. Of the 1,504 people who were infected, 22 have died but all but one of the rest have now recovered. The nation’s borders remain closed, and staying virus-free when they eventually reopen poses a big challenge.
India registered another record daily increase of 7,466 cases just before its two-month lockdown ends Sunday. The government’s new guidelines expected this weekend may extend the lockdown in the worst-hit areas while easing the rules to promote economic activity elsewhere.
Most cases in India are concentrated around its largest cities, including Mumbai and New Delhi, but cases have been increasing in some of the poorest eastern states as migrant workers who lost jobs in the cities return to their native villages.
Pakistan on Friday reported 57 deaths, its highest single-day increase since the outbreak began. That increased the overall death toll to more than 1,300 while the number of confirmed cases rose to over 64,000.
In the Philippines, President Rodrigo Duterte decided to ease a lockdown in the capital to a more relaxed quarantine on Monday after more than two months of strictures enforced by the police and military. Infections spiked in Manila recently, and Duterte warned that the pandemic is not over.
South Africa says it has a backlog of nearly 100,000 unprocessed tests for the coronavirus, a striking example of the painful shortage of testing kits and reagents across Africa as cases steadily rise.
The widespread shortages, especially in testing materials, have jolted African authorities into facing uncomfortable truths: Richer countries are elbowing them out and they need homegrown solutions to the shortages.
“We have to have Made in Africa products,” the director of the Africa Centers for Disease Control and Prevention, John Nkengasong, told reporters Thursday. “We cannot keep importing basic things.”
In the U.S., where the death toll is the highest in the world and has surpassed 101,000, there were some encouraging signs in the economic data.
The overall number of Americans currently drawing jobless benefits dropped for the first time since the crisis began, from 25 million to 21 million. And first-time applications for unemployment benefits have fallen for eight straight weeks as states gradually let stores, restaurants and other businesses reopen and the auto industry starts up factories again.
But the number of U.S. workers filing for unemployment benefits is still extraordinarily high by historical standards, and that suggests businesses are failing or permanently downsizing, not just laying off people until the crisis can pass, economists warn.
“That is the kind of economic destruction you cannot quickly put back in the bottle,” said Adam Ozimek, chief economist at Upwork.
The U.S. unemployment rate was 14.7% in April, a level not seen since the Depression, and many economists expect it will be near 20% in May.
Worldwide, the virus has infected more than 5.8 million people and killed about 360,000, according to a tally by Johns Hopkins University. The true dimensions of the disaster are widely believed to be significantly greater, with experts saying many victims died without ever being tested.

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