The Covid-19 emergency has led to a new historical phase of profound change that the social, political, and economic systems are trying to cope with.

What is the situation in major European countries? What proposals could encourage economic recovery?

This month in EiQ Industrial Magazine we take stock of the emergency from the perspective of the industrial sector in Italy, France, and Germany, to summarize what the respective industrial organizations propose for the restart.

DATA.

The scenario is still uncertain, predicting a 9.6 percent decline in GDP for this year that will rise again in 2021 with +5.6 percent.

According to a very recent rapid survey (dated June 1) by Confindustria, the main organization representing Italian manufacturing companies, industrial production in May was down 33.8 percent from a year earlier, following a -44.3 percent decline in April. In the average of the last three months, that is, since the virus containment measures were introduced, the level of the seasonally adjusted index of production is 34.2 percent lower than in February.

The end of the lockdown has encouraged a slow restart even though domestic and foreign demand remain very weak. In the spring months GDP and output will decline even more than observed in the first quarter.

The fact that there are some positive figures in May (e.g., compared to April, production increased by 31.4 percent), should not be misleading because “under conditions of low activity levels, even minimal advances in volumes translate into significant percentage increases,” explains a note from the federal government.

THE PROPOSALS.

Confindustria had intervened in March advocating these useful actions to counter the economic slowdown(available here):

• Relaunch of public investment and infrastructure as the primary driver of economic growth through an extraordinary three-year plan with extraordinary commissioners and multidisciplinary task forces
• Ambitious European-level revitalization plan
• Measures to ensure liquidity for enterprises through:
  • Enhancement of activities for the SME guarantee fund
  • Option for struggling businesses to defer tax payments
  • New lines of credit
  • Pension fund investment in SME equity and debt and infrastructure
• The launch of a vast new program for simplification at the tax level and to encourage energy transaction
• Youth employment incentives with tax breaks
• An action plan to attract, stimulate and boost private investment with enhanced tax incentives

DATA.

In France, the MEDEF (Mouvement des entreprises de France), the leading network of French entrepreneurs, estimates in a recent study an 8.2 percent drop in GDP for this year and a 40 percent drop in industry activity at the end of May.

In addition, demand will suffer a major shock with -9% consumption and -12% exports. Households will be driven to consolidate savings and their income will decrease.

THE PROPOSALS.

The MEDEF has proposed a set of economic recovery guidelines with one goal in mind: to increase confidence through three pillars.

Here are what they are with proposals referring to the area of business and industry(you can read the full document here):

• Rebuild
  • Supporting household consumption to circulate money
  • Supporting businesses economically
  • Strengthening the equity of enterprises challenged by the crisis
  • Improve attractiveness and competitiveness
  • Restoring the conditions for the movement of people and goods in Europe
• Refound
  • Mobilize European funding in strategic sectors such as aeronautics, low-emission transport, pharmaceuticals, agribusiness, digital
  • Supporting innovation in SMEs by increasing the innovation tax credit
  • Supporting the ecological and energy transition of the economy
  • Intensifying digital transformation and thinking about robotization in companies
  • Complete the review of “digital taxation” and minimum corporate tax rates
  • Promoting value sharing
  • Amplifying the CSR approach
• Protect
  • Invite all companies to develop their risk mapping to be more resilient to crises
  • Encourage companies to include crisis management in training
  • Supporting employees’ career transitions: promoting the transition from one line of business to another
  • Reorganize and redirect occupational health toward prevention

In Germany, the BDI, Federation of German Industry, estimated manufacturing output fell 11.5 percent in March compared to February-the steepest decline since 1991. Compared with the same month of the previous year, the decrease is 14.4 percent.

Orders in March also dropped 15.6 percent from the previous month.

THE PROPOSALS.

Of particular note among the BDI’s various recommendations is the “Reboot and Recovery” document, which identifies 4 steps for recovery with related actions to be taken.

These are some of the most important proposals:

• Phase 1 – Containment (2020):
  • Fostering liquidity
  • Reaching international agreements to remove trade barriers and not introduce new ones
  • Review the effectiveness of policies and their appropriateness
• Phase 2 – Re-entry (2020-2021):
  • Restoring European and non-European value chains.
  • Restoring industrial relations and processes
  • Coordinate support measures at the European level
  • Stimulating the economy
• Phase 3 – Stabilization (2021):
  • Increase household demand and consumption
  • Coordinate recovery strategies at the European level
  • Restoring and revitalizing the European internal market
• Phase 4 – Recovery (2021-2022):
  • Develop a long-term growth program
  • Encourage incentives for research and development
  • Intervening on interest rates
  • Conduct national policies in line with European initiatives and activate European funding channels
  • Re-evaluate the Climate Action 2030 program.

So far the proposals of individual states, but all the federations agree that united action at the European level will make a difference, and never before has collaboration and mutual solidarity been more crucial than in this time.

It was from these considerations that in May the three federations drafted a joint statement that serves as a message to their respective governments with the aim of calling for an ambitious single plan under the banner of solidarity, sustainability and digitization.

The three associations ask:

• To move progressively to emergency exit plans and fiscal support
• European and international coordination and cooperation that can lead to a joint response in all areas: manufacturing, the single market, cross-border transportation, labor mobility and tourism.
• An ambitious financial response with the creation of the Recovery Fund as well.
• Strong fiscal measures at the national and European levels
• Budgeted policy priorities, including ambitions for a greener, more inclusive, self-reliant and productive Europe.