As the coronavirus crisis has deepened, European governments have established virus-control commands and economy-protection commands, but few—if any—have a similar structure in place for exit command. The same is true for business. Most have established war rooms with teams assigned to cope with issues related to the supply chain, workforce management, and finances. But there has been less effort directed at establishing the detailed protocols that will be necessary to bring employees back to work safely. There is still little clarity, for example, on the most effective ways of ensuring compliance with the physical-distancing and other health protocols that will be necessary for everyday life and work to resume. We believe that in order to protect lives and livelihoods, Europe’s public and private sectors need to accelerate their exit planning so that they are ready to act when lockdown restrictions lift or loosen.
In this article, we describe how European policy makers and business leaders can think about how to prioritise both protecting lives and restoring livelihoods. Even in countries where lockdowns are unlikely to be lifted for several weeks, governments and companies need to be planning and preparing to restart their economies.
We start from three observations:
- Countries are working hard to establish enablers, especially testing, contact tracing, and quarantining.
- There is much to learn from what other countries are doing as they ease restrictions; it is important to think through how to adapt those efforts to the European context.
- A localised approach, down to the region or district level, is well suited to address the demand shocks that have, so far, inflicted the most hurt on Europe’s economies.
The spread of COVID-19, the disease caused by the coronavirus, has been uneven. In some parts of Europe, health systems are overwhelmed, and death rates are high; others have seen lower levels of infection and mortality. Even so, the efforts to control COVID-19 have been imposed uniformly within most countries. These measures have been draconian enough that the continent is likely to see the largest quarterly decline in economic activity (from 8 to 11 percent for the eurozone) since 1933. According to recent McKinsey estimates, the unemployment rate could increase 20 to 35 percent this quarter. This is the direct impact on Europe’s livelihoods. What cannot be measured—but is just as important as figures such as GDP—is the value of restoring a sense of normality and well-being, with children back in school and physical isolation eased. It is about getting Europeans back to the lives they loved.
Although most European countries are still deep in lockdown, a few are beginning to discuss publicly how to restart their economies. Austria announced that, starting in mid-April, some shops will be allowed to reopen. The Czech Republic is doing something similar—and also allowing some sports activities. Denmark and Norway are opening some schools later in April. For most countries, however, any significant loosening is at least a few weeks away.
Exiting from lockdown will be more complicated than entering it was. The risk of resurgence will have to be continually managed, including by increasing the capacity to care for critical patients if necessary. Protecting lives depends on minimizing the risk of infection to the most vulnerable (the elderly, the immune compromised, and those with serious conditions) while keeping the health system functioning. At the same time, given the complexity of the issue, European authorities need to be developing detailed plans to reopen their economies to secure people’s livelihoods well before easing lockdown restrictions begins to be possible.
So far, most of the economic harm that Europe has suffered has resulted from weak demand. Lockdown has meant that sectors such as aviation, entertainment, hospitality, nonessential retail, and manufacturing are simply not doing much business because consumers are staying home. In 17 of 25 industries studied, demand shock, not supply shocks—the availability or productivity of the workforce or materials—accounted for most of the damage (Exhibit 1). In a smaller number of sectors, such as construction, the reduction of economic activity is largely because of the lack of a workforce; in others, the disruption of supply chains is the most pressing problem.