Written by Anton Ebsen, Member of Libertas Editorial Team
+++ Figures put forward in this article might have evolved since it was published +++
Covid-19, which is most preferably mentioned as coronavirus, is a reality that affects most aspects of everyday life for people all over the globe. Right now, we are currently standing in a situation that is hurting very badly on the four pillars of the European Union and in the global economy in general. Of course, it is problematic in itself that humans die from the virus. However, it is likewise essential to keep in mind that many people may lose their bread and butter in the near future. To put it bluntly, the Coronavirus is a cross-border problem, which is why it is important to solve the health crisis together. We must do this before it is going to have too many fatal consequences for the global economy. Covid-19 is the biggest and worst crisis our society has encountered since the 2008 financial crisis or the Great Recession. This says a great deal, as the effects of the financial crisis in 200 lasted for many years and harmed the economies of many countries.
In order to be informed about the financial and economic consequences of the coronavirus, it is very relevant indeed to look at the general information about the virus. There are a total of 87,108 confirmed infected citizens in the EU/EEA and the UK. Of those people, approximately 4084 have died of it. As with other similar viruses, the coronavirus has grown exponentially with high sizes. This has resulted in several Member States choosing to lower the economic output. This decision is certainly also the most optimal tool for breaking down the coronavirus. So, there are not so many other methods that would have the same effects. Probably the most effective thing would be to stop it before it grew so massively exponentially. However, this is sadly not an option anymore.
Prior to the reality of the coronavirus, it was primarily the overheating of the global economy, Brexit and trade wars, that thwarted economic growth in the future. However, this is totally turned upside down right now. It is almost as if the majority have forgotten the other problems. One could say that an overheating of the economy will most likely not happen soon. It is probably the only thing that can be said, slightly positively about the coronavirus. However, it would only be positive to a lesser degree.
Economic studies show that by 2020, the global economy will experience a fall in GDP growth with approximately 0.5 percent. It is especially the smaller companies that have a hard time with the coronavirus. The coronavirus is a threat to the European internal market, because several member countries have declared themselves as states of emergency and chosen to close their borders completely. This, of course, affects the retrieval of foreign labor and trade between the countries in the EU. Although it is an economic crisis, it is very unlikely that it will develop into a financial crisis as European banks are more financially stable than ever before.
The EU must ensure that all companies, in particular the smaller ones, have the liquidity to avoid eventual bankruptcies. The individual member countries must offer various aid packages for the firms, and this is already being planned across Europe. It is positive to see that there is not so much party politics in dealing with the coronavirus. This is how it must remain in the future, so that it can be resolved in the most effective ways. The opposition in the individual countries will have to allow individual governments in the member countries to deal with the issues peacefully and quietly.
Anton Ebsen is a member of the Danish Social-Liberal Party. When not politically active, he studies economics at a commercial college in Denmark.
How Covid-19 affects the European Single Market