Tuesday, June 22, 2021

Europe’s summer of recovery is more fragile than it looks

ALBUFEIRA, Portugal – Until last week, Raissa Moura and her staff at the Pine Cliffs Resort reception desk felt optimistic that life would return to normal on Portugal’s Mediterranean coast.

The previous year, when the pandemic stopped the journey, they were shocked by the desolation of the normally bustling 1300-bed hotel and villa complex. They were fired and worked for weeks on end in a quiet, silent lobby processing cancellations. Outside, foxes roamed the deserted terrain uninfected.

But this summer was already taking shape in the Algarve, Portugal’s leading tourist destination. The cases of Covid-19 dropped so dramatically that Britain designated Portugal as a so-called green country, allowing its citizens to visit without returning in quarantine. The light chairs under the pine trees were full of people hoisting cocktails. The resort’s eight swimming pools resound with the sounds of children splashing.

“It feels hopeful,” she said. Moura, 28, said this past afternoon. “The resort is alive again.”

But the next day, London shocked Portugal by revoking its green country status, citing a worrying increase in business. Me. Moura and her colleagues said they were canceling again. Along the coast – from palapas by the sea to cliffs to restaurants for car rental – people whose livelihoods depend on tourists have suddenly started preparing for another lost summer.

“People were like, ‘Here we go again,'” she said. Moura tells me the day after the news broke.

I traveled here from London in early June to tell what must have been a story about a country reopening to the world, an engaging example of Europe that has finally recovered from the economic disaster that accompanied the worst pandemic in a century. Portugal absorbed the worst of the double recession in Europe in the first months of this year after severely fighting economic life to suffocate the virus. Now it was going to reap the rewards and recover faster.

But the story of Portugal’s unfolding summer appears to be a tale of the stubborn endurance of the pandemic and the erratic nature of expectation, as the virus undermines it to begin normal life. Despite signs of progress, no one knows what will happen next – in Portugal, across Europe and across the world economy. The ambiguity forces businesses and families to tread carefully, postpone investments, postpone travel plans and delay decisions while waiting for evasive certainty – a state of mind that can perpetuate the downturn itself.

Since the pandemic began, policymakers in affluent countries have portrayed locks as an attempt to stem the spread of the coronavirus. Governments muted affected workers as they waited for the health threat to the public. Eventually, so the thinking passed, they were able to safely turn the economy back on.

The season of doubt in Portugal highlights how economies do not have the built-in on / off buttons. Resorts are struggling to hire seasonal labor because workers are reluctant to travel to the region as long as future closures are possible. Local workers are careful with their money. Resorts are postponing upgrades, depriving construction workers. Potential visitors should navigate the complexity of the changing government policy regarding quarantine and testing requirements.

“It’s not a simple on and off,” said Pine Cliffs Resort general manager Thomas Schoen. “It was a stop and was already going along the line.”

The overall picture in Europe is becoming increasingly positive. After the initial phase of the vaccination campaign was rooted out, Europe gained momentum, allowing governments to ease restrictions. Shops have reopened in all 27 countries of the European Union, while cafes and restaurants may serve outside. Economic activity in the service sector shot into the heights.

Economists expect that the 19 countries that share the euro currency will experience strong economic expansion this year – a rate of 4.2 percent, according to a recent forecast from Oxford Economics.

At the heart of the optimism is the reality that Europeans are increasingly on the move, suggesting a potentially lucrative summer tourist season.

Within the eurozone, the use of public transport increased in May, reaching 72% of its pre-pandemic level, according to tracking data provided by Jefferies, a financial services company. Flight activity rose to 28 percent from the level before Covid-19, and visits to accommodation booking sites rose to 110 percent from the level before Covid, up from 40 percent in December.

Countries that are heavily dependent on tourism are likely to have benefited, including Greece, Italy and Spain. No one was better off than Portugal, where tourism – before the pandemic – accounts for almost a fifth of total economic activity, according to government data.

During the first three months of the year, when the government introduced a shutdown, Portugal’s economy shrank by a staggering 3.3 percent compared to the last quarter of 2020 – far worse than the 0.6 percent drop who experienced the eurozone.

The pain seems to be making a significant profit: From January to May, Portugal’s new Covid cases dropped to less than 200 a day from more than 15,000.

“We are already starting to see a better picture of public health, and therefore things are also improving in the economic picture,” said Ricardo Amaro, a senior economist at Oxford Economics.

Britain’s decision to name Portugal as a green country was particularly important. The British traditionally flock to Portugal as a respite from their often gloomy weather, just as New Yorkers use Florida to escape the winter.

Portugal received more than 2 million visitors from Britain in 2019, according to the national tourism board. Only neighboring Spain sent more.

In the Algarve – a coastal empire of villas, resorts and golf courses – the unemployment rate of the region is stubbornly higher than ten per cent, compared to 7.1 per cent for Portugal as a whole. The revival of tourism was supposed to rectify this.

At a fish market in the city of Quarteira, the reopening of restaurants has raised fresh demand for sea bass, squid, octopus and shrimp.

“This year is much better than last year,” said Assunção Gomes as she took care of the market stall she oversees with her mother.

But for most local traders, the recovery was more aspiring than obvious.

Carlos Martins, a 41-year-old father of two, supports his family by working on a fishing boat and hauling in nets full of sardines. In recent summers, the price of sardines reached 7 euros per kilogram (about $ 8.50), when wholesalers arrived from Spain to increase the catch. When foreign buyers stayed away last year, prices fell by 85 percent, dropping their wages by almost as much.

“We are all waiting for prices to recover,” he said. Martins said. “If the fish is almost free, fishermen are not paid.”

Vera Galvão had been working as a waitress in her father’s seafood restaurant for more than two decades when the pandemic broke out, which had to close the business.

Most workers in large parts of Europe continued to draw salary checks under further schemes. But then Mrs. Galvão going to submit the paperwork to receive benefits, she was horrified to hear that she was not eligible: her father did not pay the required tax, she said.

Between May and July last year, Ms. Galvão, 41, a single mother of two boys, relied on loans from friends to buy groceries. She now works for a non-profit business that collects food at supermarkets in the area and delivers it to households.

“Many, many people who have lost their jobs have not yet been able to find new ones,” she said.

Continued anxiety about job security limits sales for local businesses and discourages them from hiring – a feedback loop of lean happiness.

At a beachside café in Quarteira, glass-baked pastries are displayed in glass shelves – regional delicacies such as fig and almond cake, and national assistance such as Portuguese egg pies. But sales are weak, complains owner Manuel Picareto, 71. Most of his customers are locals working in tourism.

“Instead of two pastries, people buy one,” he said. Picareto said.

Since villa owners canceled the trip last year, they have removed the maintenance of the pool and garden areas and scrapped the books of AlgarvePool.com, a company owned by a Ukrainian couple, Iryana and Sergii Liashenko.

“Our revenue is down 75 percent,” Liashenko, 37, said.

The Liashenkos have been feeling hopeful for the past few weeks when their phone rang. Villa owners were returning. Their pools and gardens are choked with weeds and algae. Irrigation systems need to be repaired.

“We think more money will come in,” Liashenko said.

A few hours later, the British government withdraws Portugal’s coveted green land designation. The news resounded like a thunderstorm on a wedding day.

‘Everyone is crying’, used Cláudio Lopes Meireles, a Brazilian who owns a gelateria in Albufeira and used an unprintable word to describe what Britain had just done to local fortunes. “We live by English tourists.”

In anticipation of fewer sales, he limits his purchases of imported supplies – pistachios from Sicily, cocoa from Belgium – which export sobriety to the rest of the continent.

At a nearby liquor distributor called Empro, drivers showed a stack of 800 buckets of hard cider piled up to the beams in a hollow warehouse, wondering if they would find persons before the contents expired.

Empro relies on more than two-thirds of its sales to UK visitors. The cider was one of the various products he stored to suit the unique British taste. Tourism can benefit from the European Union’s newly developed Covid certificates, which allow travel for those who have been fully vaccinated or recently tested. But Empro’s marketing manager, Susana Cavaco, has dismissed the suggestion that visitors from elsewhere could compensate for the loss to Britons, given their legendary intentions to consume large amounts of alcohol – beer on the beach – followed by cocktails and wine during lunch hours. .

“No one drinks like the British,” said Mrs. Cavaco said.

The government in London will not re-evaluate its green land list for another three weeks.

At the Pine Cliffs Resort – a complex of white buildings with terra cotta tiles placed on a perch above the sea – management has struggled to recruit enough seasonal workers and understaffed the property by about 25 percent. Schoen, the general, said manager.

Due to the need for social distance, it can not operate a breakfast buffet, but there are not enough staff for an efficient seating service.

Mr. Schoen has built up cash reserves against future problems. He has postponed an investment in a new kids club and delayed the planned renovation of restaurants.

“I believe in the good things of the future, but we must also be realistic,” Schoen said. ‘I’m not convinced we overcame every bump in our way. We will continue to hold back until there is a good deal of certainty. ”

The next day, Britain downgraded Portugal from an approved holiday destination to a potentially dangerous breeding ground for coronavirus variants.

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