The international economy in the caliber of the crowns - The return of China By Maria Negreponti - Delivani 16.03. 20

The international economy in the caliber of the 
crownvirus -The return of China

By Maria Negreponti - Delivani 16.03. 20                                                                              

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 The fear of our survival is certainly higher than any of our concerns about the economic impact of the coronavirus , although they are already strong and visible around the world. At some point, however, and hopefully soon, this catastrophe will end, and then the need for immediate treatment of the economic wounds that this virus accumulates will be urgent . These wounds are predicted to be deep.       

1. World and European economy before the crown

 The devastation caused by this pandemic is already visible and poses a serious threat to the global economy, which was before the invasion of the virus burdened with three adverse developments. The first of these refers to the not at all good situation of the world economy, with several indicators recording an unorthodox course, announcing the coming of a crisis. Such as very low and in many cases negative interest rates. Like the inability of economies to secure the desired level of 2% inflation. Like the "inflation" of stock markets, along with the sluggish growth rate of real economies. As well as the higher performance of short-term stock securities compared to long-term ones. This is the second time that companies have been over-indebted, on a global scale, encouraged by excessive liquidity with almost negative interest rates. These loans are estimated at the end of 2019 to reach the unseen amount of $ 13.5 trillion. After the virus appears , 40% of these loans are estimated to be impossible to repay. This is the third recent decision by the Prince of Saudi Arabia to lower the price of oil, in order to punish Russia, which did not agree with its proposals to limit production, but mainly to reduce its country's over- dependence on oil. The aim is, of course, to make significant investments in other areas.                          

The first consequence of the coronation in the economy, and absolutely expected after all, was the collapse of the stock markets, internationally, with losses of trillions and a parallel rise in the price of gold. Therefore, of course, terrible, but nevertheless it was not a mortal blow of this crisis. This is because, as is well known, stock market fluctuations are impressive, in a period of irregular situations, but they usually return to normal soon , even before their cause disappears. On the contrary, what is at stake in bringing about an irreparable and lasting blow to the international economy is the dismantling of the global production chain. Globalization, although already receding under the effects of the trade and technological warfare launched by the planetary leader, has, however , created an uncontrollable degree of interdependence in the fifty years of its reign. economies. Thus, innumerable sections or stages of the production process of large and small companies have spread to all longitudes and latitudes, with the main goal of achieving the maximum possible profit. This dispersion carries serious risks to the smooth running of the world economy, whenever there is, for whatever reason, a problem in the production or distribution of goods. The proliferation of such problems interrupts the smooth continuation of world production, causes shortages of spare parts, goods and raw materials, has adverse effects on transport and employment and threatens recession or even crisis.                      

 The Crown Prince also found the European economy, in particular, in poor condition. Germany, which for decades had taken on the role of Europe's steam locomotive (mainly, of course, Northern Europe ), has recently emerged as the biggest patient and is dragging Europe into recession. Indicatively, its dominant industry , Daimler - Mercedes , only for 2019, recorded a drop in profits of 64% or 2.7 billion euros, while at the same time facing justice with high fines for misinformation about the characteristics of new models. of. In China alone, which has already reduced car markets by 80% due to the crisis, Germany sold around 700,000 cars compared to the previous year. The problem of Europe's stagnation in recent years is also reflected in the constant revision, always downward, of the initial growth forecasts.            

2. Coexistence of global and European economy with the crown 

 China, from which the Crown Prince began , is the world's second largest economy. Despite declining growth over the past two years, it remains much higher than the West, at around 5.6%, at least until the virus arrives. The China also provides 1/3 of global growth, is involved in 16% in world GDP and competes with or preceding the US, a number of new technologies, while the population reaches the ena disekatommyrio tetrakosia million. Next, therefore, is the impact of China on the global becoming extremely important, not only on the course of supply, demand, savings and investment, but also on the generalization, speed and severity of the spread. crisis, which begins within it. It was therefore expected that strict, and as already demonstrated effective measures against koronaiou , imposed flash China, will cause insuperable and permanent abnormalities in all sectors of production and distribution of products in the world. These anomalies have been exacerbated by similar measures taken by other countries in the world, as one after the other accepts the visit of the Crown Prince . The closure of many Chinese businesses is causing shortages of goods, spare parts and raw materials around the world, making it impossible or very difficult and certainly more expensive to continue their own business. Thousands of workers are laid off. Airports, ports and traffic routes remain closed. A large number of merchant ships in the world remain inactive, causing a loss of many billions of dollars. There is chaos in the tourism industry, as about fifty million people have been affected by the measures against the pandemic in their travels. The fall in oil demand, combined with falling prices, has plunged oil profits sharply, with a major impact on the global economy's growth momentum.                                               

3 .. How long will it take for the global economy to return to normal?

After six weeks of successful fight against the virus, the Chinese economy is trying to rebuild itself, helping the international economy regain its normalcy.    

However, the situation is difficult and the relevant efforts take time. Some of the problems with the reopening of the Chinese economy, which are reflected in the economies of the rest of the world, are:

* factories in China operate on average, 40-60% and their full reopening requires borrowing, which will take time, because they need to be checked in case the damage is not real.

* workers' return to work is problematic, as the risk of new cases cannot be ruled out

* more than 500 million migrants have not returned to work because some are quarantined, while others live in rural areas whose transportation to the center has not been restored, so many businesses operate with only 2/3 of their workers. 

* The problem of declining demand for Chinese goods from abroad, which threatens to limit growth, is also very important. 

* orders not made interrupt the continuation of production 

Businesses in the rest of the world are expected to face similar or more problems . The time it will take for the global production machine to return to normalcy is not easy to calculate, especially since most European economies are still far from getting rid of the virus. Given all of the above, the World Bank estimates that the decline in global growth will reach around $ 3 trillion or 5% of global GDP.      

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