‘How are we going to eat?’ … COVID-19 tests Europe’s social nets

MADRID (AP):

The morning rush-hour scene at Madrid’s Atocha train station this week perfectly captured the dilemma facing Europe as it confronts the novel coronavirus.

Governments have locked down commerce, beefed up healthcare measures, and earmarked billions of euros into Europe’s famed safety nets to cushion the economic blow to businesses and blue-collar workers alike from measures meant to contain the virus.

But trimmed commuter train schedules at Atocha, the main gateway into the Spanish capital for the working classes, meant that huge crowds formed on the platforms, defeating the government’s appeal for ‘social distancing’. Lay-offs, looming and real meant that those who still had work reported for duty – with or without protective masks – even if they would have preferred to stay home.

“I fear the coronavirus, but I fear more not being able to pay the utility bills,” said Mari Carmen Ramírez, 55, who was commuting to her €950 ($1,100) a month job as an office cleaner. “When this is all over, how are we going to eat?”

As European governments pass sweeping spending measures to address the pandemic, they are being called on to look out for the workers who are not only losing their jobs – the waitresses and tour guides, hairdressers and hotel maids – but those who still must show up because they can’t work from home. Europe’s famed safety nets are being stretched thin, at a time when many economies were already skirting recession and wealth gaps have grown.

WILL IT BE ENOUGH?

Governments from Prague to Paris, Lisbon to London, are deferring tax payments, approving short-term unemployment schemes and paid sick leave to cover even those in preventive quarantine. Hardest-hit Italy approved €25 billion in measures, including vouchers for babysitters. The Czech government offered a €750 stipend for students studying abroad who opt to stay abroad through Easter. Denmark said it would pay 75 per cent of employees’ salaries if companies promise not to fire staff.

“This epidemic will be a catastrophe for all countries of the world,” warned French Finance Minister Bruno Le Maire in announcing €45 billion ($50 billion) in aid for small businesses ,on top of the tens of billions already promised for individuals forced to stop working because of workplace closures.

THE SHOCK WILL BE VIOLENT

In Spain, now with the second most infections in Europe after Italy, the left-wing coalition government announced yesterday a mix of social and economic measures, including credit guarantees for companies and subsidies for workers, worth one-fifth of the country’s annual gross domestic product.

The economic blow is already evident, with companies likes German carmaker Volkswagen’s Spanish unit temporarily laying off more than 14,000 from its Martorell plant, near Barcelona.

The workers will be paid 80 per cent of their wages until they are rehired, hopefully as soon as the economy recovers.

More than 100,000 workers were affected by similar temporary lay-off schemes across industries, Spain’s Cinco Días business newspaper calculated.

The economic pain is particularly high in countries like Italy and Spain, which are still feeling the after-effects of the global financial crisis. The percentage of people classified as economically vulnerable – those who are poor, face high debt or unemployment – was 26 per cent in 2017 in Spain, higher than the European Union average of 22 per cent.

European governments have also pledged loans, with Germany offering at least €460 billion ($513 billion) in guarantees. Britain announced £330-billion ($405 billion) worth of government-backed loans and guarantees for small and large businesses, specifically to help firms pay their rent, the salaries, and suppliers. Several countries are expanding short-term work programmes that were successful during the 2008 financial crisis in keeping people on the payroll.

But, again, those measures do not address the needs of many of the most vulnerable: the poor ,but also manual labourers like cleaners and contractors without a fixed salary.

While some governments, like those of France and Denmark, have promised to guarantee the majority of individuals’ salaries, detail on how they will do that is still largely unclear – though urgently needed.

Safety nets

Governments, meanwhile, are bolstering and broadening existing safety nets.

Britain will ensure workers are entitled to the legal minimum sick pay from the first day of illness rather than from day four. It’s unlikely to be enough, however, since the legal minimum is a mere £94.25 ($115) a week.

An analysis by the Resolution Foundation think tank in Britain suggested that a typical self-employed worker could see income fall by three-quarters if forced into quarantine, while a typical worker eligible for the legal minimum would lose over two-thirds of normal pay.

Yesterday, Britain’s treasury chief, Rishi Sunak, said that following discussions with lenders, three-month mortgage holidays will be available for those in financial difficulty “so that people will not have to pay a penny towards their mortgage, while they get back on their feet”.

Other governments are also postponing the payment of taxes, social insurance and mortgages, and offering extra paid leave, though the measures appear to be piecemeal.

Factories had been exempted from the government’s March 11 shutdown decree, meaning the blue-collar workers of Italy’s industrial heartland were forced to report for duty. Last week, workers at plants across Italy began going on strike or threatening to do so.