Europe’s Corona Forbearance

I read an interesting view point (Archive) in today’s FT about the current economic measures in various EU countries and how they’re mostly geared towards ‘forbearance’ — furlough schemes, wage support, loans, etc. With impending national elections (Netherlands has its general elections in less than a year), no government wants to risk losing votes by enacting measures that do anything other than protect current jobs.

Even in The Netherlands, the government has gone out of its way to support airlines and banks, being as they are, some of the largest employers in the country that also support a farm of smaller businesses that depend on them for sustenance. This is even though people are increasingly banking cross-border with one of the many Fintech companies, or flying less.

While the re-election consequences are worth noting, perhaps governments ought to balance doing the right thing with doing the timely thing. Innovation budgets have been cut, and entrepreneurs are usually left to depend on private loans or crowdfunding, especially because the venture funding scene in Europe remains risk-averse. Just when the country needs to double down on innovation into new kinds of businesses and jobs, most of the financial firepower is being used to prop up failing companies.

This makes me wonder if the next wave of innovative companies would come from the ‘lazier’ economies of the South. Their bailout and social schemes have been under immense scrutiny over the last couple decades, and the electorate has already hiked the route of disillusionment. They have nothing to gain by keeping failing jobs propped up. But, they stand to become even less competitive if they did not use the incoming sovereign bailout funds to invest in startups and new jobs.

The challenge is that any mis-step would have consequences for the next decade, and I really hope that all this leads to Europe coming out on top.

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