As the one-year anniversary of lockdowns across Europe draws near, the narrative around Eurozone labor markets’ perceived resilience is deceiving. Employment-retention schemes propped up more than 25 million workers in the big four Eurozone economies alone in the immediate aftermath of the Covid-19 shock. On the flipside, however, 13.7 million unemployed workers have to a large degree been frozen out of employment. Given the at best gradual defrosting of Eurozone labor markets over the coming year, coupled with the prospects of a jobless recovery, we see a heightened risk that the cyclical labor market shock turns structural, with unemployment stabilizing at an elevated level.
European non-financial corporates have seized the opportunity of state-guaranteed loans to build up cash reserves, especially in France, the UK and Italy. Overall, the build-up of cash reserves is positive as it provides buffers for future debt redemptions even if this is not a short-term concern anymore.
The volatility of major asset classes often makes headlines at the risk of overlooking another source of risk: changing patterns in correlations between market segments. Focusing instead on co-movements between key asset classes:
In the midst of uncertainty, risk literacy can help us make the right decisions in an informed way. Risk literacy is the ability to perceive risks and the aptitude to make appropriate decisions after becoming aware of these risks. To measure risk literacy during the Covid-19 crisis, we asked almost 7,000 people in seven countries questions related to numeracy and risk literacy, as well as about the impact of the pandemic on their finances.
The higher the digitization of your country or company, the higher the resilience of this country or company in a context of Covid-19. The Euler Hermes Enabling Digitalization Index (EDI) measures the ability – and agility – of countries to help digital companies thrive and traditional businesses harness the digital dividend.
As Italy’s next Prime Minister, former ECB President Mario Draghi starts with a double economic burden: weak growth momentum and a vaccination delay that could cost EUR10bn (0.6% of GDP).
