Report: Half Of Europe’s Small Businesses Face Closure Due To Pandemic Effects

I have at length discussed the state of small business in the US and how the pandemic has affected it, which is largely to push many businesses to close and further the expansion of megabusinesses. However, I have not given equal treatment of this issue to Europe. Unfortunately, from what I could see, the trends remained similar to the US, but without any good studies to support this concern.

However, according to a recent study from Bloomberg via Zero Hedge, the COVID-19 economic problems have created a situation where half of Europe’s small businesses face closure.

The survey, of more than 2,200 SMEs in Europe’s five largest economies, was conducted in August before coronavirus cases on the continent started to spike. With some countries, Ireland, France, and Spain, reimposing stricter social distancing measures to mitigate the virus spread, this could easily result in more economic pressure that would ultimately squeeze SMEs.

McKinsey found 20% of SMEs in Italy and France could file for bankruptcy within the next six months. Like the US, European SMEs account for two-thirds of the workforce and at least half of economic value-added. A further collapse of SMEs is a warning sign of an economic recovery that doesn’t resemble a “V-shaped” recovery.

“The pandemic has hit European firms hard, with 70% reporting lower revenues. That level was even higher in Italy and Spain, reflecting the severity of the virus and lockdown measures in those countries,” Bloomberg said.

In a recent interview, ECB President Christine Lagarde told French newspaper Le Monde that Europe’s economic recovery is “running out of steam” amid a second wave of the virus pandemic.

“The second wave of the epidemic in Europe, particularly in France, and the new restrictive measures that accompany it add to uncertainty and weigh on the recovery,” Lagarde said.

Eurozone GDP could plunge by as much as 8% in 2020, according to the latest ECB predictions.

“If the situation deteriorates, this will obviously darken our forecasts, which we will revise in December,” Lagarde said.

As for Rabobank strategist Piotr Matys, who was quoted by Reuters, he believes the virus pandemic storm never left, but during the summer period, “we were in the eye of the storm, I think.”

“Some governments assumed the worst was over… but now the invisible enemy is hitting even harder and I am worried about the fragile economic recovery,” said Matys.

In short, Europe will need to unleash another fiscal or monetary cannon to save SMEs from imminent doom as rising cases force some countries to reimpose strict social distancing measures. This is more bad news for investors who thought a “V-shaped” recovery was around the corner. (source)

This crisis is far from over. Even if the mentioned ‘monetary cannon’, which is just another name for ‘money printing’, is done, it will not solve the fundamental problems of debt, default, and banking. The debt is the main issue that has to be dealt with, and since Europe does not have the world reserve currency such as the US does in the dollar, it is likely that she is going to suffer a lot more than the US.

However, the more the European economies suffer, the more tenuous their situation becomes, and the greater the likeihood that extreme politics, nationalism, and ultimately, militarization will be seen as useful tools to solve their problems.

Remember the warning of Hans Frank in 2017- as long as Germany is making money, she will be fine, but five to ten years of heavy economic problems will turn a swamp into a lake into a sea and will swallow Germany again like what happened in the last century.

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