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Record Economic Growth Expected, but Problems Remain: Live Updates

  • October 29, 2020
Shoppers on Wednesday in Bordeaux, France. French officials expect the new lockdown will have a severe effect on many businesses.
Credit…Philippe Lopez/Agence France-Presse — Getty Images

France was bracing for a fresh blow to its beleaguered economy as President Emmanuel Macron reimposed a nationwide lockdown through December to prevent an alarming surge of coronavirus cases from spiraling out of control.

In a televised address on Wednesday, Mr. Macron said the virus had rapidly resurfaced “everywhere” in France, and that requiring businesses to close and people to shelter at home was the only solution to curbing the pandemic. He pledged substantial financial support to prevent a wave of bankruptcies and layoffs from rippling through the eurozone’s second-largest economy.

“You can’t have a prosperous economy when you have the virus circulating throughout the country,” he said.

The new lockdown, which will begin Thursday night, would still allow essential sectors to keep operating, and it won’t be as severe as the country’s two-month nationwide quarantine earlier this year, when the entire country was shut in, Mr. Macron said.

Still, he acknowledged it would have a severe impact on businesses that have already grown cash poor because of previous restrictions to curb the virus.

France is expected to report on Friday a jump in growth during the third quarter, when summer vacations helped fuel a temporary economic revival.

But those figures will likely be eclipsed by the new lockdown, economists warned. The government has calculated that 60 billion euros is lopped off economic activity for every month in which a total lockdown is active.

“Macron did not want to be here,” Mujtaba Rahman, the managing director for Europe at London-based Eurasia Group, said in a note to clients ahead of the announcement. “He had hoped by now to be celebrating an economic recovery from the first lockdown.”

Vulnerable sectors are likely to sink further, including retail, aviation, tourism and hospitality, which make up over 10 percent of economic activity. In Paris alone, for example, the hotel occupancy rate had already plunged to 26 percent in September, when a new curfew was put into effect, according to MKG, a French consulting firm. That figure is likely to worsen.

Bars, restaurants and nonessential businesses will close, although students will continue to go to school. Factories, farms and construction sites will stay open, along with some public services, to limit potentially wider economic damage. Earlier Wednesday, Germany announced the closure of restaurants and bars, starting Monday.

French lawmakers last week approved a fresh 100 billion euro package to bolster the country’s economy, on top of nearly 500 billion in financial aid announced during the previous lockdown. Businesses hardest hit by the new confinement will get 10,000 euros per month, and their payrolls will effectively be nationalized so that employees who cannot work may keep their jobs.

Firms that can’t pay rent will be able to obtain waivers, while small- and medium-sized businesses would get additional financial help, Mr. Macron said. Remote work will be “the go-to solution” for all companies, Mr. Macron said.

“The economy must not come to a halt,” he said.

Article source: https://www.nytimes.com/live/2020/10/29/business/us-economy-coronavirus

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