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Virus restrictions deal European economy lesser blow than in spring

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The wave of new coronavirus lockdowns that has swept across Europe in recent weeks has hit consumer services activity hard, but the wider economy is less affected than when the pandemic first hit in the spring, according to high-frequency data indicators.

Alternative economic data such as truck mileage, trips to entertainment venues and offices, and restaurant bookings have become widely watched since the pandemic began as they offer a more timely gauge of the economy, although they are less comprehensive and reliable than official data.

The indicators show the damage that the new restrictions are doing to Europe’s services industry, but they also suggest that more people are continuing to travel to work than they did in the spring and manufacturing is still operating.

“Lessons have been learned by governments from the first lockdown as sectors that provide marginal gains in terms of virus containment are now still open,” said Bert Colijn, an economist at ING. “Governments have focused largely on keeping economic activity going and curtailing recreation and retail . . . this is a ‘lockdown of fun’.”

Line chart of Government response stringency index, 100 = strictest  showing The new lockdowns are lighter than in the spring

Travel to entertainment and retail hubs plummeted in the first week of November, according to geolocation phone data tracked by Google.

The largest falls were in countries where the new lockdown involved the closure of all non-essential retail, such as France and Ireland.

In countries where restrictions are more narrowly targeted, particularly Germany, mobility to consumer services hubs shrank less.

In some countries, such as Spain and Italy, governments have adopted a mixture of curfews and localised lockdowns rather than strict national measures.

Line chart of % change compared to average from Jan 3 to Feb 6 (rolling seven-day average) showing European visits to retail and recreation venues plunge

The hit to the broader European economy looks milder than in the spring as factories and building sites have remained open in most countries.

Travel to workplaces has not fallen to the levels seen at the height of the first wave of the pandemic, even in the countries with the strictest lockdowns. In France, it fell 30 per cent in the first week of November — half the drop seen in the spring.

In Germany, work-related travel has barely changed from the peak of economic reopening this summer.

Ana Boata, head of macroeconomic research at trade credit insurer Euler Hermes, said the economic hit of the new restrictions to the eurozone economy in the final quarter “should prove 30-60 per cent less severe” than in the spring, and so the bloc’s recovery “could thus be delayed but not derailed”.

She forecast a 4 per cent quarter-on-quarter fall in eurozone gross domestic product in the final three months of this year.

However, she also warned of an increased risk of “of long-term scarring to the economy . . . in the face of more insolvencies, higher unemployment and increased pressure on the banking sector”.

Line chart of % change compared to average from Jan 3 to Feb 6 (rolling seven-day average) showing Mobility to workplaces has not fallen as much as in the spring

Continued growth in Europe’s export-led manufacturing sector is also helping the wider economy.

The German truck mileage index, which closely correlates with industrial production according to the German office for national statistics, was holding up strongly in early November. Germany is by far the eurozone’s largest manufacturing producer.

And the European supply chain is currently running at 94 per cent of its capacity according to Shippeo, which tracks real-time information on transport flows and the operation of power plants across Europe.

Stefan Schneider, chief German economist at Deutsche Bank, said: “European borders for goods remain open, in sharp contrast to April, which will keep disruption of international supply chains at bay.”

Container shipping fees for routes between China and East Asia to Europe — an indication of trade volumes — continued to rise in October and early November, according to the Freightos Baltic index, as Asian economies’ early recovery from the economic impact of the virus supports growth in eurozone exports.

Angel Talavera, head of European economics at Oxford Economics, said: “The industrial sector continues to fare comparatively better, and the recovery in manufacturing looks more solid at the moment.”

The divergence between Europe’s deteriorating services sector and its resilient manufacturing activity “will widen further over the coming months”, he said, adding: “The hope is that this industrial resilience will help partially offset the blow overall to economic activity in [the fourth quarter].”

The outlook may also be aided by the potential Covid-19 vaccine breakthrough announced on Monday, which fuelled a global equity rally. On Tuesday the ECB said that the “long-term damage to the economy could be hoped to be rather small . . . if a vaccine is found that ensures that the shock is not lasting or recurring”.

Line chart of Index (rolling seven-day average) showing German truck toll mileage is up
Line chart of Index showing Freight rates from East Asia to Europe rise



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EU pledges aid to Lithuania to combat illegal migration from Belarus

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EU immigration updates

In the latest sign of deteriorating relations between the EU and Belarus, Brussels has promised extra financial aid and increased diplomatic heft to help Lithuania tackle a migrant crisis that it blames on neighbouring Belarus and its dictator Alexander Lukashenko.

Lithuania detained 287 illegal migrants on Sunday, more than it did in the entirety of 2018, 2019, and 2020 combined, the vast majority of them Iraqis who had flown to Belarus’s capital Minsk before heading north to cross into the EU state. Almost 4,000 migrants have been detained this year, compared with 81 for the whole of 2020. 

“What we are facing is an aggressive act from the Lukashenko regime designed to provoke,” Ylva Johansson, the EU commissioner for home affairs told reporters on Monday after talks with Lithuania’s prime minister Ingrida Simonyte. “The situation is getting worse and deteriorating . . . There is no free access to EU territory.”

The EU imposed sweeping sanctions against Lukashenko’s regime in June, after he fraudulently claimed victory in last year’s presidential election and then led a brutal campaign to violently suppress protesters and jail political opponents. Lukashenko has ruled Belarus since 1994.

The rising concern over the migrant crossings, which EU officials say is a campaign co-ordinated by Lukashenko’s administration, comes as one of the country’s athletes competing in the Tokyo Olympic Games sought refuge in Poland after team management attempted to fly her home against her will after she publicly criticised their actions.

Johansson said the EU would provide €10m-€12m of immediate emergency funding and would send a team of officials to the country to assess the requirements for longer-term financial assistance, including for extra border security and facilities to process those attempting to enter.

Simonyte said that Vilnuis would require “tens of millions of euros” by the end of the year if the number of people attempting to cross the border continued at the current pace.

Lithuania’s foreign minister Gabrielius Landsbergis told the Financial Times in June that Belarus was “weaponising” illegal immigration to put pressure on the Baltic country over its housing of several opposition leaders. Since then, the flow of illegal immigrants from Iraq, Syria, and several African countries has increased sharply.

Iraqi diplomats visited Vilnius at the end of last week after Lithuania’s foreign minister flew to Baghdad in mid-July. Johannson said on Monday that EU diplomats were engaged in “intensive contacts” with Iraqi officials, which she said were “more constructive than we had hoped”.

State carrier Iraqi Airways offers flights from four Iraqi airports to Minsk, according to its website. Former Estonian president Toomas Ilves suggested on Twitter that the EU could cut its aid to Iraq “immediately until they stop these flights”.

Speaking at the border with Belarus on Monday, Johansson added that the tents provided by Lithuania were unsuitable for families. Lithuania’s interior minister Agne Bilotaite said she hoped the number of illegal migrants would subside in the coming months but that Vilnius was planning to build some housing to accommodate them over the upcoming winter.



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Britain’s wrong-headed approach to refugees

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UK immigration updates

Thanks to the bravery of volunteers who run towards storms at sea to rescue ships’ crews, few British institutions command as much respect as the Royal National Lifeboat Institution. The charity, however, has recently had to negotiate a different kind of storm, over its efforts to help refugees who get into difficulties crossing the Channel from France. Nigel Farage, the former Brexit party leader, accused it of running a taxi service for illegal trafficking gangs. Last week, the RNLI said it had received hundreds of thousands of pounds of extra donations in response.

The RNLI has become embroiled in a now familiar story when the summer months allow more small boats to make the Channel crossing. Compared with the flows to other countries such as Spain, Italy and Greece, only a handful of migrants attempt the journey. That makes the UK’s inability to control the border in an effective and humane way — and shabby treatment of those who do make it across — no less of a scandal.

Britain’s strategy for stemming the flow has relied mostly on paying the French authorities to limit the number of boats crossing and return any that leave to France, while deterring would-be migrants through the unwelcoming environment that awaits them. Just as EU countries are dependent on their neighbours for keeping entrants down — whether Morocco for Spain or Belarus for Lithuania — the UK needs French co-operation to control the mutual border. Diplomatic spats, whether over Brexit or extra Covid quarantine restrictions on arrivals from France, have made that harder.

The UK approach manages to be simultaneously ineffective and cruel. Yvette Cooper, chair of the home affairs select committee, wrote last week to home secretary Priti Patel to complain of unacceptable conditions in the holding facility for migrants who make it to the Kent coast. A recent unannounced visit by MPs found most of those remaining in the overcrowded facility sitting on a thin mattress on the floor, with women and children in the same room as adult men.

Earlier this year, the High Court ruled that “squalid” conditions in the Napier Barracks, a temporary centre set up last year to house asylum seekers during the pandemic, were so bad as to be unlawful. While arrivals have declined since the peak seven years ago, cutbacks have led to a backlog in processing claims, leaving more in a legal limbo.

Since the start of the pandemic Britain has shut down other paths into the country, ending a resettlement scheme. This has ceded the ground to people traffickers. The “push factors” of the risk of violence and torture at home and “pull factors” of higher living standards mean many are still willing to resort to risky and illegal methods to try to reach the UK. Creating a harsh environment for those who make it has done little to dispel the widespread belief among migrants that Britain is a better destination than other European countries, and stem the flow.

That will not stop the government trying. Barristers have warned that a clause in draft border legislation could potentially make it a crime to help asylum seekers arrive in the UK, with a maximum penalty of life imprisonment; at present it is illegal to do so to earn a profit. The Home Office says the clause is aimed at criminal traffickers. But along with a suggestion to set up offshore processing centres, the provision has rightly earned criticism from human rights groups. If the government is unwilling to create safe and legal routes, its only option is to prevent people from coming in the first place. That, ultimately, will mean relying on France.



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Olympic organisers investigate after Belarusian runner seeks refuge

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Tokyo Olympics updates

A Belarusian runner due to compete at the Tokyo Olympics was taken to the airport against her wishes after making complaints about her coaches, according to media reports on Sunday night.

The International Olympic Committee, the Games organisers, said it had asked for clarification from the Belarus team about the status and whereabouts of Krystina Tsimanouskaya, who is due to compete in the women’s 200m sprint on Monday.

Belarus’ dictatorial leader Alexander Lukashenko and his regime are widely seen as international pariahs after he fraudulently claimed victory in last year’s presidential election and then embarked on a brutal campaign to suppress protesters and supporters of his rival, which has seen thousands beaten and jailed. 

Images and video circulated on social media sites by Belarusian opposition activists appear to show Tsimanouskaya at Tokyo’s Haneda airport, where she refused to board a plane and instead sought refuge with Japanese police.

Krystsina Tsimanouskaya took part in the heats for the women’s 100 metres on Friday but narrowly missed qualifying for the semi-finals © Aleksandra Szmigiel/Reuters

The IOC said it “has seen the reports in the media, is looking into it and has asked the [Belarus] national Olympic committee for clarification”.

Japanese police did not immediately respond to requests for comment.

The Belarusian Olympic Committee did not immediately respond to requests for comment, but a statement attributed to the body suggests she had been removed from competition by coaches on the advice of doctors advice about her “emotional, psychological state”.

Late on Sunday, Tsimanouskaya shared a screenshot of that statement on Instagram with the message: “This is a lie.”

“I am asking the International Olympic Committee for help, they are putting pressure on me and they are trying to take me out of the country without my consent,” Tsimanouskaya said in a video message reportedly recorded on Sunday evening from the airport and posted on social media.

A person close to Olympic officials said there remained “confusion” around the incident, adding they had been told that Tsimanouskaya had boarded a coach to the airport and had gone through the departures area to board a plane to Istanbul, where she then sought Japanese police to ask for asylum.

Belarusian opposition leader Sviatlana Tsikhanouskaya tweeted that she was grateful to the IOC for its quick reaction. “She has a right to international protection and to continue participation in the Olympics. It is also crucial to investigate Belarus’ NOC violations of athletes’ rights,” she said.

Tsimanouskaya on Friday appeared to criticise her coaches and team management in an Instagram post that said she had been “ignored” and that “people in higher ranks should respect us as athletes”.

The 24-year-old had taken part in the heats for the women’s 100 metres on Friday but narrowly missed on qualifying for the semi finals of the event. She is listed on official Olympics sites as due to compete in the first round of the 200 metres at the Olympic stadium on Monday morning.





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