In northern Portugal, Tiago Carvalho is nervously counting the days until his business has to stand on its own two feet again.
The restaurant owner in Braga, home to the country’s oldest cathedral, says revenue is less than a third of what it was before the coronavirus kept tourists away and confined locals to their homes. Even with lockdown restrictions largely rolled back, customers have stayed away, reflecting the slow pace of recovery across Europe.
Unless that changes soon, Carvalho and thousands of others like him are in trouble. At the end of July, Portugal plans to stop its so-called “simplified layoff” program, which like dozens of similar government programs across Europe has helped keep people in their jobs by paying part of the compensation for staff unable to work.
The cliff edge for firms and workers in Portugal echoes those looming over much of Europe. In coming months, emergency programs will expire across the continent, creating the risk of a second-wave hit to the economy.
“The layoff measure has to continue or else restaurants will have to dismiss workers,” said Carvalho, 40, who runs two eateries in Braga and acts as a spokesman for a local group representing about 140 restaurants. One lunchtime last week, he served only two tables at one of his restaurants.
After July, the Portuguese government plans to transition to other measures that include incentives for companies to keep jobs, but the impact is uncertain.
Governments elsewhere are also aware of the danger. Many are tapering programs rather than shutting them off, and some are trying to extend support further despite the pressure on budgets. France on Wednesday outlined plans for a new jobs protection scheme that could run for up to two years.
But that may not be enough, with demand across the continent well off its pre-crisis levels, and perhaps unlikely to be fully restored any time soon. Figures from Insee, France’s statistics office, show activity in Europe’s second-largest economy still more than 10% below normal.
For companies, particularly small firms with limited cash reserves and razor-tight margins, that gap could be the difference between survival and collapse. Closure means job losses, and a negative spiral of rising unemployment and falling demand, all of which is bad news for already battered economies and strained public coffers.
Governments have already pumped billions into support schemes, and blown out their budgets in the process. At the center are furlough programs, with more than 45 million workers protected during shutdown. However, some of those are temporary, meaning they may only be delaying job losses.