As expected, the coronavirus pandemic caused economic contraction across the globe. But as China, the United States, and other countries are getting back on their feed, the Eurozone still lags. Europe reported a 0.6% contraction in the region’s economy. This is the second quarter that there’s a decline in economic growth. Over this same period, the US economy grew by 1.6%.
What’s the reason behind this? Many believe this is a result of slower than expected rollouts of the coronavirus vaccine in Europe.
On the other hand, France’s economy expanded by 0.4% quarter-over-quarter. Yet, it was Germany who brought the overall numbers down, with a 1.7% GDP contraction. Economist Maddalena Martini at Oxford Economics noted that much of this is still dependent on moving past the global pandemic.
“Today’s GDP data for the first quarter suggests a fair resilience of the bloc’s economy and sends encouraging signs surrounding the near-term outlook,” said Martini.
A Greek shop owner remains hopeful: “From now on, we hope that things will get better, because of the vaccines, because of the measures,” she said. “If tourism comes and they don’t bring us COVID but leave us money, it will be much better.”
Travel restrictions start to ease
As we head into the summer months, many businesses throughout the region are awaiting guidance on easing travel restrictions that could have a massive impact on revenue and profits for the remainder of the year. In the first of hopefully many reports of good news, the EU recently announced that starting in June, UK residents who are fully vaccinated will be allowed to travel on holiday throughout Europe. These plans will also apply to other countries where infection rates are low. However, individual states will impose their own rules on testing and quarantining as they see fit.
Tourism is such a huge part of Europe’s economy that easing restrictions will likely do wonders to the region’s ability to get back to economic growth. Regarding this announcement, European Commission president Ursula von der Leyen noted:
“[It’s] time to revive the tourism industry & for cross-border friendships to rekindle – safely. We propose to welcome again vaccinated visitors & those from countries with a good health situation. But if variants emerge, we have to act fast: We propose an EU emergency brake mechanism.”
Amazon avoided European corporation tax in 2020
Despite sales totaling €44 billion in the region last year, Amazon avoided paying corporation tax. Amazon EU — which is based out of Luxembourg and does business in the UK, France, Germany, Italy, the Netherlands, Poland, Spain, and Sweden — reported a loss of €1.2, which allowed them to forgo the tax, which must only be paid when a corporation earns a profit in any given year. Even further, this loss led to a €56 million tax credit that the company can use in future years to offset tax payments.
Many are furious at big corporations like Amazon who avoid paying their fair share of taxes. Labor MP Margaret Hodge has previously campaigned against just this, hoping she can create changes in the tax law that reduce these loopholes.
“It seems that Amazon’s relentless campaign of appalling tax avoidance continues… Amazon’s revenues have soared under the pandemic while our high streets struggle, yet it continues to shift its profits to tax havens like Luxembourg to avoid paying its fair share of tax. These big digital companies all rely on our public services, infrastructure, and educated and healthy workforce. But unlike smaller businesses and hard-working taxpayers, the tech giants fail to pay fairly into the common pot for the common good.”
The broader implications of regulating gig workers
Thanks to increased pressure from regulators, many companies like Uber will now have to classify their gig workers as permanent employees. They were previously employed as gig workers—independent contractors who have flexible, temporary, or freelance jobs. Uber alone was forced to reclassify 70,000 of its workers after losing a UK Supreme Court case on the matter.
Yet, many are concerned that while this is a victory for those who can now qualify for benefits and paid time off, the implications are far-reaching. For one, companies will likely be unable to employ everyone who worked as independent contractors. The cost of an employee is higher than a gig worker, and companies will have to adjust as a result.
This could lead to consumers paying higher prices for these services. While this could be hard for some consumers, John Ryan of Gigable believes that most consumers will be OK paying slightly more knowing that employees are being treated fairly.
“I think people are comfortable enough with increases in pricing if they know it’s going to the drivers or there’s public support for the move, but that remains to be seen.”