EU leaders balance need to halt economic damage against risk of resurgence in easing lockdown

Brussels

EUROPEAN leaders are starting to sketch out their strategy for putting the economy back to work once the coronavirus has been brought under control.

Austria and Denmark are beginning to open up some schools and shops this week and French President Emmanuel Macron said on Monday night that he wants to begin phasing out restrictions from May 11. Chancellor Angela Merkel is due to discuss her plans with German state premiers on Wednesday while the European Commission has drafted a plan to coordinate the moves.

Governments are trying to balance the desperate need to halt the damage to the economy against the risk of a resurgence of the pandemic. The number of new cases in Europe has stabilised in recent days though more than 50,000 people have died on the continent, and the fatalities continue to climb.

Spain reported the lowest number of new cases since March 20 on Tuesday, increasing pressure on the government to relax its state of emergency.

So leaders are planning a gradual easing of the restrictions on economic activity. The commission, in a draft seen by Bloomberg, warned that they will have to be prepared to re-impose lockdowns if the number of infections starts to spike again.

"When will we be able to go back to the way things were?" Mr Macron said in his television address. "In all honesty, in all humility, we don't have a definitive answer to that."

The situation is dire, with the crisis widely seen as more serious than the Great Recession of the late 2000s. There is little sense of international coordination among the Group of Seven or G-20 governments despite the virus's indiscriminate global reach and repeated talk of doing "whatever it takes".

The euro-area economy is set to shrink more than 10 per cent in the first half of this year, according to Bloomberg's monthly survey. French Finance Minister Bruno Le Maire put his country's contraction at 8 per cent.

As one of the first countries in Europe to shut down, Austria is now a much-watched example of how to go about the task of re-opening itself up again - and it will be an agonisingly slow and complicated process.

Austrians lined up outside hardware and gardening stores on Tuesday morning as the country became one of the first to ease lockdown measures. Stores of less than 400 sq m can also reopen so long as they limit the number of people inside to maintain distancing. Face masks are mandatory in all shops as well as in public transport. If there is no pick-up in infections all other stores can reopen on May 2 with schools, restaurants and hotels following in the middle of the month.

Volkswagen's Audi plans to reopen its factory in Gyor, western Hungary, on Tuesday, Kisalfold news website reports, citing a video message from board chairman Alfons Dintner.

On Wednesday, Denmark will reopen primary schools and hospitals will start to conduct non-critical procedures for patients suffering from conditions other than Covid-19.

On the fringes of the European Union, the UK is the main laggard having delayed imposing tight restrictions and seen key officials including Prime Minister Boris Johnson infected. The UK is projecting that the British outbreak will not reach its peak until later this week, and the government is due to review its exit strategy on Thursday.

Having spent years extricating itself from the bloc, the post-Brexit reality is that the UK is pursuing its own political experiment on how to manage the virus. Its future trade relationship with the US and the EU is still entirely up in the air.

The European Commission is due to present its guidelines for lifting restrictions also on Wednesday, though the disruption to economic and political life is set to last for months.

A draft circulating last week envisaged a limited re-opening of shops and restaurants initially with mass gatherings such as festivals and sporting events coming later. The draft also proposed lifting internal border controls before opening up the European Union's external borders again.

In Germany, the leader of Mrs Merkel's Christian Democrats, Annegret Kramp-Karrenbauer, told Deutsche Presse-Agentur that she is likely to scrap plans for a special conference to select a candidate for chancellor next year and will instead wait for the party's regular gathering in December.

Germany's public health authority sounded a note of caution too. Testing slowed down over the four-day Easter holiday weekend, making official case tallies less reliable, Lothar Wieler, president of the Robert Koch Institute, warned in a briefing. "We cannot finally conclude if new case numbers are really falling," he said.

Manufacturers such as carmakers are in favour of a joint European approach to the return to work because their supply chains are closely connected across EU member states. Cooperation between Brussels and national governments has at times been difficult during the outbreak because the speed and the intensity of infections differed from country to country.

One of the many effects of the virus has been highlighting the deficiencies of the bloc, with the old tensions between the frugal north and the debt-addled south returning. Italy and Spain have been the worst-affected countries, and are looking for financial help and solidarity without the kind of conditions that the Dutch are insisting on.

Even as the number of fatalities in both those countries are finally showing real signs of slowing down, the residual resentments of not feeling supported by its fellow euro partners are not going away and feed into the impression that every nation is out for itself. BLOOMBERG