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Europe is winding down its pandemic aid programs. Is it too soon?

Europe is winding down its pandemic aid programs. Is it too soon?
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Europe is winding down its pandemic aid programs. Is it too soon?

Europe is winding down its pandemic aid programs. Is it too soon?

After nearly 18 months of relying on expensive emergency aid programs to support their economies during the pandemic, European governments are scaling back some of these measures, relying on the return of economic growth and the power of vaccines to deliver the load from here.

But the spread of the Delta variant of the coronavirus has thrown a new variable into that calculation, raising concerns over whether the time is right to cut back on financial aid.

The tension is visible in France, where the number of new cases of the virus has increased by more than 200% from the average of two weeks ago, prompting President Emmanuel Macron to try to push the French to be vaccinated threatening to make it harder to shop, dine, or work if they don’t.

At the same time, some pandemic aid in France – including generous public funding that has prevented mass layoffs by subsidizing wages, and relief for some companies struggling to pay their bills – is being cut.

A government panel recently called for “the utmost caution” about cutting emergency aid even further at the end of the summer.

The eurozone economy has finally emerged from a double-dip recession, according to data last week, reversing the region’s worst slowdown since World War II. European Union governments, which have spent nearly € 2 trillion on pandemic aid and stimulus, have freed nearly all businesses from lockdown restrictions, and the bloc is set to fully vaccinate 70% of adults by the fall to help cement the rebound.

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But the obstacles to a full recovery in Europe remain significant, raising concerns over the end of aid which has been repeatedly extended to limit unemployment and bankruptcies.

“Governments have provided very generous support during the pandemic with positive results,” said Bert Colijn, senior eurozone economist at ING. “Cutting aid too quickly could create a backlash that would have negative economic effects after doing so much. “

In Britain, the government has suspended subsidies for reopening businesses after the Covid-19 closures and will end a special top-up in unemployment benefits by October. At least half of the 19 countries that use the euro have already sharply cut aid in the event of a pandemic, and governments from Spain to Sweden plan to phase out billions of euros in subsidies more aggressively to fall and until the end of the year.

Jack Ewing contribution to reports from Frankfurt, Eshe nelson from London, and Léontine Welsh from Paris.

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