The Biggest threat to Europe’s economy is not the Lockdown
Raw Material shortages are causing bigger headaches
European citizens have been patiently waiting for our Economies to re-open. One year of Covid has taken its toll. Unemployment is at an all-time high. Hundreds of thousands of businesses throughout the continent have either been forced to shut or are working far below capacity. Tourism, which has been such an important source of income for many European countries, has been decimated.
We can see the end of the tunnel. We know Spring is coming where the transmission of the virus will drop significantly. We also know that vaccinations are moving along. Once you’ve got the most sensitive populations vaccinated, the strain on the health system will slowly be relieved. (For example, the Greek Ministry of Health is already reporting a drop in hospitalizations and covid related deaths among the 80+ year olds — these were the first groups vaccinated in Greece)
But as we emerge from this crisis, Europe is facing a bigger economic threat that, so far, only people at the top of the supply chain are noticing: There is a massive shortage of raw materials and supplies.
How will these shortages affect us?
Factories in Europe need raw materials and semi-finished goods to produce their final goods. If they can’t get these materials on time, then they can’t produce their goods. This means production needs to be scaled back, and in some cases, manufacturing plants will be closed. This will leave an impact on employment and wages for people working in the manufacturing sector.
A shortage of raw materials also leads to an increase in prices for these commodities. Eventually, manufacturers need to pass these increases down the supply chain to wholesalers, retailers, and consumers.
So the European retail sector will be facing a dual-threat: Increased prices of finished goods and a shortage of many in-demand goods.
Why do we have shortages?
There are many reasons why we have shortages. After the 1st wave of Covid in the spring of 2020, demand for raw materials crashed as economies all over the world contracted. That left us…