In its latest edition of the COVID Recovery Monitor, Moody's Investors Service believes the pace of recovery in Europe’s five largest economies continues to slow as uncertainty and caution remain elevated following the recent spikes in pandemic cases. The uncertainty over the level of the rises added to fears over job security may knock consumer confidence which is still struggling to recover since the European wide lockdowns were eased. Senior Credit Officer for Moody’s, and the report's author, Vincent Allilaire stated: ‘Rising caution may help limit a resurgence of the coronavirus, but it will also negatively affect consumption’, adding, ‘Consumer sentiment remains low and economic activity is stabilising at below-normal levels, with the summer holidays partially blurring trends’.
The report also touches on the unequal situation that is being played out across Europe when it comes to household finances, something we have mentioned before. Those households who are on lower pay, on zero contact hours, in the hospitality and tourism sector or self-employed have seen dramatic falls in their household income even with the various temporary unemployment benefits that have been put into place across the EU. A high percentage of these households will be burning through cash reserves or indeed going into debt to make ends meet, whereas those at the other end of the ladder have been unable to spend spare cash over the last few months.
One idea that has cropped up numerous times is the concept of a form of universal basic income that everybody could claim with supporters of these schemes believing they could reduce inequality and improve well-being, whilst opponents argue it would discourage work and be too expensive. The notion that everyone gets paid a lump sum monthly, regardless of their income or employment status, effectively replacing means-tested benefits. Germany is the latest country to trial such a scheme. As part of the research, 120 people will receive EUR 1,200 a month for three years, which is just above Germany's poverty line and researchers will compare their experiences with another group of nearly 1,400 people who will not receive the payments.
There have been many debates on the pros and cons of such schemes. As Jürgen Schupp, the German sociologist who is leading the study, said of the opposing views ‘It is, on both sides, shaped by clichés: Opponents claim that with a basic income people would stop working in order to dull on the couch with fast food and streaming services. Proponents argue that people will continue to do fulfilling work, become more creative and charitable, and save democracy’.