Coronavirus Pandemic: We Are Facing a European Task
Public Events
15.04.2020
#ZEWlive Debate on the Economic Consequences and the Path out of the Coronavirus Crisis
The world is in a state of emergency. The spread of the coronavirus presents us with a situation we have never faced before. Our daily routines have radically changed; economies are struggling as supply and demand are collapsing at the same time. With a recession looming, policymakers are already discussing about how to reboot the economy. The crisis, which poses a crucial test for Germany and Europe, was the focus of #ZEWlive, an event hosted exclusively online for the first time as part of the ZEW event series “First-Hand Information on Economic Policy”.
The #ZEWlive event on “Coronavirus – The German Economy Under Pressure”, which was moderated by TV and radio journalist Elif Şenel, was closely followed by around 260 guests, who engaged in a lively discussion via the chat function and raised questions regarding current political, economic and societal challenges: How will Germany as a leading exporter be affected by the current crisis? Which steps are firms taking to ensure that their employees are safe? How can we strike a balance between economic profitability and duty of care?
As part of the event, ZEW President Professor Achim Wambach and Dr. Ralf Krieger, CFO of the telecommunications company Freudenberg SE and member of the ZEW Sponsors’ Association, engaged in a discussion that shed light on the crisis from the perspective of both economic research and businesses. What they had to say captured the ongoing crisis in its complexity.
While the German government has rolled out a massive programme to help stabilize the economy and markets, businesses have also responded to the crisis in their own way, explained ZEW President Achim Wambach. The industry is, for instance, using 3D-printing to produce medical equipment, and new online platforms have been set up to help re-allocate workers to where they are needed. However, “in order to reboot the economy and lead society back to normal in a controlled way, we will need data, and as a next step, a stimulus package that targets sector-specific problems,” explained Wambach. Compared to past experiences, this crisis is quite unique.
“The lesson from this crisis: we need more diversification”
“This is not only a German problem. We are facing a European task,” stated the ZEW president. According to the speakers, the immediate closure of European borders was rather problematic, as this led to vital supply chains and labour mobility being disrupted. In addition, other countries also urgently need measures like a short-time work scheme introduced in Germany. “More needs to be done at a European level,” emphasised Wambach. And there are already ideas how this can be done: a joint, centralized procurement process for medical supplies like sterilisers, blankets and ventilators, for instance, promises efficiency gains for Europe. “The lesson learned from this crisis is that we need more, and not less diversification,” stressed the economist. Sealing off national markets is a step in the wrong direction.
Freudenberg CFO Ralf Krieger agreed: “We’re part of a common European economic area and need to pursue a regional approach. Purely national productions are inefficient.” According to Krieger, Freudenberg is also feeling the effects of the crisis. However, with more than 400 production sites around the world and as a company that primarily operates as a supplier to more than 40 sectors, not all of Freudenberg’s segments are affected equally. While demand remains high when it comes to household cleaning and medical supplies, the situation is quite different for areas like mechanical engineering. Freudenberg has therefore already adopted cost-cutting measures through short-time work schemes like in the financial crisis of 2008/09 and cut back on investment in order to prepare for the difficult times ahead.
When it comes to the manufacture of non-woven fabrics, which are, for instance, needed to produce respiratory masks, Freudenberg is regarded as one of the biggest players in the market. “Not all non-woven materials are suited for mouth and nose masks,” Krieger pointed out, “we are currently working on new production technologies.” It is therefore crucial to follow a coordinated European approach, but it is equally important for companies to assume responsibility on their own initiative.
To achieve this, the Freudenberg Group has partly adjusted team structures, adapted shift patterns and supports its staff to strictly follow hygiene measures. “Our primary concern is our employees’ health,” said Krieger. According to Freudenberg’s CFO, corporate principles and responsibility are by no means conflicting goals. ZEW President Achim Wambach agreed with Krieger’s conclusion: “When health is weighed against the economy, we are on the wrong path.”