Economists today said Europe may recover faster from the Covid crisis from the US, in a reversal of the fallout from the 2008 financial crisis.
Donald Trump’s approach of not funding furlough schemes in the US – where the unemployment rate is 11% – has been in contrast to much of his European peers.
Simon French, chief economist at Panmure Gordon, said: “It depends on what happens post-Covid, if consumer spending demands change permanently then the US strategy was the right thing to do. If behaviour changes the US will recover faster because Europe will have jobs in the wrong parts of the economy.
“Overall I would rather be in the European boat in terms of both healthcare and protecting capacity. Numerous labour market studies have shown that with large numbers out of work there is much higher potential for long term scarring affect.”
Guntram Wolff, director of Bruegel, an economic think tank, told the New York Times: “So far Europe is doing quite well, with a huge increase in unemployment in the U.S. and not so much here.”
“If what we see is temporary, if we return to an economic system much like before, then [Europe’s] is the right response… But if you think there will be longer-lasting shifts, if you need to reallocate, then the US, which is more agile, may be better off.’’
Thomas Pugh, an economist at Capital Economics, said comparing the economies was difficult, not least as much of America was not locked down. “Europe had a much sharper fall than the US, so the rebound looks steeper,” he said. “It’s hard to compare the two, and we won’t get the full picture on unemployment until next year.
“It does look like a lot of European economies are bouncing back quicker than we had expected.”
French added: “It does appear that the economies like France and Italy that locked down more appreciably have recovered faster than the likes of the UK and others that have tried more partial lockdowns.”