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Factories fire up in Europe to pull economy back from the abyss

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London: Volkswagen AG is rebooting plants, Airbus SE is up and running and UK builders will soon be erecting homes again as Europe starts returning to work after coronavirus shutdowns plunged the region into its worst economic slump in living memory.

Factory doors are reopening after nations from Denmark to Germany began easing restrictions on public life, with Italy, France and Spain to follow. But it won’t be a sudden return to business as usual. Companies will have to implement social distancing and hygiene measures to keep workers safe, after the pandemic claimed more than 110,000 lives in the region.

The restart is crucial to pull the European economy out of a tailspin that’s forced governments to pledge hundreds of billions of euros to keep companies afloat. Measures of private-sector business activity plummeted to an all-time low in April, with record job cuts.

Even in Germany, the nation that may weather the crisis best, business sentiment is “catastrophic,” according to the Ifo research institute. But while shutting down factories is relatively easy, ramping them up again is more complicated because even small kinks in the supply chain can cause major disruptions, said Michael Groemling, an analyst at the Cologne-based German Economic Institute.

“What complicates matters even more is that no one knows for sure how demand in the key markets in Europe and the US will shape up in the coming months,” Groemling said by phone. PSA Group, for one, isn’t saying when it will reopen European factories. The maker of Peugeot, Citroen

and Opel automobiles said there’s no point in building up inventories while sales are dormant. “It’s important to have dealership and sales activity before we push the button,” Chief Financial Officer Philippe de Rovira told analysts.

 

Source :economictimes

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