Europe’s Trial and Error Shutdown Leaves Trail of Costly U-Turns

(Bloomberg) --

Carlos Bernabeu and his Spanish company Arborea were caught on the wrong side of Europe’s frantic attempt to figure out which parts of the economy should shut down to slow the spread of the coronavirus pandemic.

He was forced to halt inspections of wind turbines when the government ordered all “non-essential” businesses to close in mid-March. He and other energy executives quickly called officials, explaining the lockdown decree meant technicians couldn’t travel to check on critical infrastructure -- an oversight that could eventually lead to energy shortages.

The intervention worked, and Arborea, which uses special drones for inspections, was allowed to keep operating. Spain also reversed course on the construction industry, shutting it down after initially allowing builders to work during the lockdown, while Germany lifted a ban on seasonal farm workers after warnings of food shortages.

Governments across Europe have been forced to improvise as they shift resources toward health care and shut down other parts of their economies to contain the virus. In doing so, they’ve had to decide which businesses are essential and which aren’t. The result has been a playbook written in real time and in many cases reversed days later, causing confusion among companies and workers during a time of heightened uncertainty.

“We don’t have a script or a master plan,” Spain’s Economy Minister Nadia Calvino said Sunday on La Sexta television. “The government, from the very beginning, has been absolutely committed and working day and night to try to respond in the best possible way to an unprecedented situation.”

Spain and other European governments have pledged billions of euros in aid to help companies and workers survive through the shutdown. But business leaders say that if lockdowns are calibrated incorrectly, disrupting supply chains, stalling essential machinery and sending some companies into bankruptcy, that could undermine any recovery once the pandemic passes.

“There’s an extraordinary sense of uncertainty about our government,” Bernabeu said. “The feeling at the moment is one of extreme concern.”

In Germany, the government’s efforts to prevent the spread of the virus saw it call a halt to farm workers entering from other countries. Last week, officials scrapped that decision, and will allow up to 80,000 helpers to join the harvest in April and May.

Simon Schumacher, who leads a union representing asparagus and strawberry farmers, says the u-turn was a huge relief. But it might not be enough. Their harvest requires about 180,000 seasonal workers a year.

“It’s already guaranteed that we will harvest much less than in previous years,” Schumacher said. “Even if people can come from Eastern Europe, many are afraid of flying and getting infected.”

Spain has also adapted its plans on the fly. Worried that too many workers were still showing up at their jobs, the government has since ordered even more companies such to shut.

On his way to work in Spain’s industrial north last week, Alfredo Suarez, CEO of Asturmadi Group, drove past some metalworking plants that had closed down overnight because of the decree, while others were still operating.

“No one knew who was supposed to open and who was supposed to close,” said Suarez, who has recently recovered from Covid-19.

Stuck in Port

He took the latter option and now has a stock of 4,000 fire-resistant doors that were bound for hospitals in Latin America sitting in shipping containers in the northern Spanish port of Gijon. He also hit pause on a construction project.

Governments agree that food and pharmacies play an essential role in the pandemic economy. For many companies, so do nannies and babysitters.

At pharmaceutical firm Almirall SA, some workers have to be on-site for production of in-demand medicines at its factory in Barcelona, but school closures can make that difficult. So it hired childcare for those employees. Such demand has been a boon for Nannyfy, a Spanish website that matches childcare workers with families. It earned more in March than it did in all of 2019, according to Chief Executive Officer Claudia de la Riva.

In other industries across the continent, many companies and workers decided the priority is stopping the pandemic.

“Often business leaders are scared of being criticized for making their employees come to work,” said Etienne Mahler, who heads France’s small business confederation CPME in the east of France. “Rather than adapting, it’s simpler to close everything especially if furloughed workers are paid by the government.”

His company, medical equipment manufacturer MS Technique, is operational and has taken steps to minimize contact between workers. Mahler thinks other companies could do the same.

“Beyond the question of what business is vital, there’s still an economy that has to keep running,” he said. “The government aid is very good, but one day it will have to be paid for and it’s dangerous to stop everyone from working when they could safely continue.”

©2020 Bloomberg L.P.