What lies ahead is simply unique

The economic dimension of the crisis is huge. That’s now obvious to everyone, as the figures about unemployment and temporary layoffs become known. And that explains the gigantic size of the recovery programmes that have been announced. The amounts are just mind-boggling, difficult to imagine, because of the large number of zeros that follow the initial figure. Hundreds of billions, many of them close to trillion figures, or even above, as it is the case in the US. We are talking about funds that are simply not available. They will have to be printed.

It is a dramatic situation to many families and a move to extraordinary levels of indebtment by the States, the corporations and firms, and the families. Large amounts of debt, both public and private, were already a key feature in many countries. Our economies have been in the red for several years. But the previous debt levels will look as small fish when compared with the numbers in the next phase, the recovery phase. Most of that debt will be untenable and will have to be write off, sooner or later. That will cause major changes in wealth ownership. The point will be to manage such transition in a way that would avoid the ruin of key sectors of the economy, including the pension mechanisms, the banking and insurance systems, the bond and the property markets.

It is indeed a completely new ball game. We will have to play it and keep defining the rules as we move on. It will require an extraordinary level of international cooperation. That means wise leadership, plenty of foresight and political courage. Unfortunately, wise leadership seems to be a dimension that is seriously absent in the current international relations scenario. In my opinion, that’s one of the key risks that can seriously disrupt the next stage of our life in this small planet. These will be exceptional times.

Positive stories must be told as well

Reports say that China is 85% back to normal. I have some questions about this figure. I think it is too high. But there is no doubt that the economic activity is resuming. And people are again on the move. There are still some restrictions being imposed, especially on travellers intending to come in from abroad. But all in all, things are now moving in the direction of recovery. 

That’s good news. Our media should be reporting about that. We need that kind of encouraging news. It is not good just to be inundated with our own sad figures and disturbing information about the existing chaos in some of our Western places. 

We must also fight all types of prejudice concerning the Chinese people. That should be part of the new world, the one we would like to live in, after the Covid crisis.

Spain is getting back on its feet

I just spent a good number of days travelling in the Andalusia Region, in Southern Spain. I saw once again a country full of dynamism. To me, all signs appeared to show that the economic recovery is firmly on its way. Business is moving up. This is certainly good news.

It is also true that people keep complaining about the cost of living, the scarcity of job opportunities and the high-handed taxation system. They are certainly right. Spain, like other EU countries, is putting too much pressure on the working people. They are the ones that finance a good deal of the recovery. They are the ones that get heavily taxed. And this should not be the case. 

EU recovery winds

In the EU, this month of July ends with a more optimistic note. At least, that’s what some analysts would like us to believe. They are now saying they see some signs that the worst of the economic crisis is past. That we might return to positive growth rates during the second half of the year.

If we look at the recovery in Ireland, we might come to the same conclusion. I am certainly very encouraged by the level of international investment the country is able to attract, which is a clear indicator that confidence is back and the overall macro-economic framework is getting the right shape. 

But one swallow doesn't make a summer. 

We can even forget Greece and its chronic development challenges. We cannot however be blind to the economic situations in Italy and Spain. These countries are not out of the woods. And they combine economic depression with political fragility. This is the worst combination we can have as one of the keys that opens the door of recovery is a strong government with a clear popular mandate and indisputable political legitimacy.