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The cum-Covid recovery: comparing best practices. How to combine health and business

    • Meeting in digital format
    • 17 September 2020

          The main challenge associated with the spread of Covid-19 into the autumn/winter is going to be healthcare facilities’ ability to diagnose and treat a growing number of virus cases (as per all predictions) and distinguish them from seasonal flu. While Covid countermeasures will surely contribute significantly to reducing the incidence of regular flu, the annual illness will in any case continue to deplete healthcare resources.

          The knowledge accumulated over the course of the earliest stage of the pandemic has provided a great advantage, but many factors (the behavior of the general public, healthcare system organization, rules imposed by the authorities, and so forth) are going to determine the successful handling of the next crisis. Research naturally proceeds on all fronts, especially in diagnostics and vaccines; nevertheless, the production and distribution of vaccines is going to require a major international collaborative effort to ensure availability to higher risk categories first and then to the broader public.

          The urgency of economic recovery inevitably conflicts with the need to enforce cautionary measures to stem the spread of the virus. In any case, maximum consistency in government-imposed measures is essential, not only at the level of national systems (coordination of general rules, regional and local intervention and the collaboration of healthcare facilities across the nation) but at international level as well.

          Despite some variation from country to country, the overall demographics of the Covid-19 contagion have changed considerably (evidence of a sharp rise in people’s laxity over the summer), along with a certain shift in its socioeconomic impact, given the much greater spread among young people in the second phase now under way. It is also true, however, that a substantial awareness of risk and appropriate behavior now prevail in the wider public.

          Across the board, every country has found itself needing to coordinate the various levels of government: local, regional and national (or federal, as in the case of Germany). Examples such as the United States, and to some extent Spain, illustrate the complexity of multiple level governance systems with strong local autonomies, but what is really going to make the difference will be the adoption of as uniform measures as possible clearly communicated by the authorities. According to some observers, we are in the presence of a true institutional crisis from that standpoint that could offer some key constitutional lessons.  

          While the international economic framework is subject necessarily to a range of uncertainties, nevertheless some structural changes (associated partly with the possibilities offered by “remote working”) can already be observed when comparing one sector to another, with some left more precarious than others and possibly at risk of not surviving. These kinds of transitions have historically been delicate, with the greater portion of the burden being borne by certain segments of producers and workers. Obvious examples include the automotive and civil aviation industries, which have been hit hard by the crisis and not least in coincidence with a profound technological transition driven by environmental priorities.

          Meanwhile, Europe’s two largest economies find themselves at a delicate juncture, with France at risk of missing its chance to launch a financial hub capable of attracting massive investments, and Germany struggling to pursue an ongoing manufacturing transition that has thus far yielded only partial results. Great Britain is reeling from the impact of the double shock of the pandemic and the uncertain implications of Brexit; moreover, whatever the outcome of post-Brexit agreement negotiations, Europe will undoubtedly have a price to pay.

          The international framework is a determining factor in the economic prospects of countries such as Ukraine, not least because of the strong geopolitical tensions to which the country is exposed; and despite its certainly very different situation, a country such as Mexico shares regional and global concerns, particularly with regard to the possible evolution of the new free trade agreement with the US and Canada that took effect last July (USMCA in place of NAFTA). Clearly a global framework where protectionist impulses prevail and the overall desire to cooperate multilaterally is waning is dangerous for all nations regardless the size of their economies.

          Over the medium term, European economies’ ability to make major adjustments by using the post-Covid crisis to prompt farsighted choices is going to be decisive for their future performance. Over the short term, the OECD’s predictions are better than was anticipated before the summer, especially thanks to massive financial inoculations from the government, the ECB and the Recovery Fund; but serious concerns remain for small businesses, especially in the restaurant and tourism sectors. Business loan parameters are another area at risk to be closely monitored, as banks could decide to tighten them despite the current very favorable interest rates.

          On a positive note, currencies are stable, financial markets remain optimistic and no large-scale problems have been reported in the credit sector. Much of the merit for this is owed to ongoing recovery support efforts particularly as regards investments in technological innovation and environmental sustainability.

          Italy’s 2020 GDP slump is predicted to be around 10% as compared with the country’s 2019 figures, and realistic expectations for a full recovery to pre-pandemic levels are for no sooner than 2023. Without a doubt, a rough impact (and not only in Italy) associated with consumer/investor caution in the near future is to be expected. It is common knowledge, then, that the Italian economy is going to be faced with at least two major structural issues: a very high public debt, necessitating balance of payment surpluses, and limited productivity, which short-term measures are certainly not going to fix.