In the centre of Florence, near the Uffizi gallery and Cathedral of Santa Maria in Fiore, Pasquale Naccari has serious doubts about whether the seafood and pizza restaurant his family has run for more than 50 years can survive much longer.
“We are in a desperate situation,” said Mr Naccari. “My bank account balance is almost zero for the first time in years and my business is on the verge of collapse; state funding is inadequate, badly distributed and delayed.”
The plight of the Il Vecchio e il Mare restaurant epitomises the existential crisis facing thousands of Europe’s small and medium-sized companies that have had much of their income wiped out by the coronavirus pandemic and the curbs to contain it.
The eurozone economy fell into a double-dip contraction in the final quarter of last year, shrinking 0.7 per cent from the previous three months, data published this week showed, resulting in a record postwar contraction of 6.8 per cent over the whole of 2020.
However, there is almost no trace of this painful situation in the latest data on the number of businesses filing for insolvency in the eurozone, which fell sharply after the pandemic hit the region last March and stayed lower for the rest of the year.
Experimental data published by Eurostat this week showed a one-fifth drop in businesses filing for insolvency in the eurozone in the third quarter of 2020 from a year earlier. That followed a 41 per cent year-on-year drop in corporate insolvencies in the second quarter.
The main reason is that governments have spent huge sums to shield their economies from the pandemic.
The bloc’s four biggest economies, Germany, France, Italy and Spain, committed to spend an extra $3.1tn — a third of their combined gross domestic product — including vast loan guarantees, subsidies for millions of people’s wages and bailing out scores of companies, according to the IMF.
But Mr Naccari said government aid, including subsidised wages for furloughed employees, had often been delayed and was nowhere near enough to offset a 60 per cent drop in his restaurant’s revenues.
“We cannot cover fixed costs such as electricity, water and gas,” he added. “Some people lack the cash flow to pay the rents of their houses and do their shopping. Those who survive today do so only to fail tomorrow.”
In response, some Italian restaurant and café owners have started disobeying an order to close at 6pm. In Hungary, restaurant owners promised a similar show of civil disobedience during protests in Budapest last weekend.
Even in Germany, where the government has spent more on its pandemic response as a share of GDP than most European countries, there are signs that the second lockdown in force since…
Go to the news source: For how long can Europe keep businesses from going under?