Fondia countries' approach on managing COVID-19 pandemic
Countries around the world have different approaches on how to manage and tackle COVID-19 pandemic. There is a variety of methods and differences between countries, but also similarities. Fondia’s cross-boarder team of lawyers compared the methods in use in Finland, Sweden, Estonia and Lithuania.
One of the benefits of working in an international company is that it provides an opportunity to monitor and experience how different countries and cultures see and react to situations affecting them all. How different and how similar are we? Despite the unpleasant circumstances, COVID-19 presents an interesting opportunity to look into the differences and similarities on how countries react to exceptional situations. Joint Finnish, Swedish, Estonian and Lithuanian team has looked into and compared how Fondia countries react to the corona virus situation.
Sweden has been famous for its extremely liberal approach in this case. No quarantine measures were imposed, except for a few limitations. Lithuania, on the contrary, introduced stricter measures than other Baltic or Nordic countries.
Thus, if Colleague A in Sweden could still be getting in shape for summer in a sports club, this would be impossible for her colleagues in Finland, Estonia and Lithuania. However, Colleague B in Finland could still leave his child in kindergarten throughout a day and get his hair cut during the lunch break, while this would be impossible for Colleague C in Estonia and Colleague D in Lithuania. While colleague C could purchase a new phone in person, colleague D could only order it online.
All the measures put in place to contain the spread of corona virus eventually allowed the gradual reopening to begin in all four countries. Vilnius got famous online as the city offered its public spaces for the use of outdoor restaurants rather widely. It looks like in summer we might have a very similar situation and will not have to rely on home cooked meals every day. Last week all Baltic countries reopened the borders creating Baltic bubble for their citizens to allow travel without the need to justify the purpose of their trip and no need to isolate themselves for 14 days after crossing the border. Finland opened its borders to necessary commuter traffic and other necessary traffic as well.
Although different levels of restrictions were put in place, people in all four countries positively evaluate the actions of their governments. Their only criticism was their countries’ slow initial reactions and a lack of information. All health authorities were criticized for poor communication, especially when COVID-19 began to spread. For example, Finns now give their best marks to their President and the Prime Minister, while Lithuanians – to the Government. Swedes have mixed concerns: the general public seems to believe that the actions of the government are important and relevant. Their critique mainly concerned the capacity of their hospitals and the lack of preparation for a situation such as this.
How will our economies be affected?
Spring Economic Forecast of European Commission estimate the following numbers. Lithuania: GDP decline by 8% in 2020 and then rebound by 7½% in 2021; Estonia: contract by 7% in 2020, growth 6% in 2021; Finland to contract by 6¼% in 2020, to rebound 3¾% in 2021; Sweden to fall by 6% in 2020, before veering back over 4% in 2021. We have heard some economists already betting for different scenarios. It will be interesting to see. For Lithuania and Estonia these numbers still look more positive than in 2008-2009 but for Finland and Sweden such declines will be rather new experiences in modern times. It will be interesting to see how realistic today’s prognosis are is.
Speaking about public finances, it is also interesting to note total tax revenue to GDP ratio differences: Lithuania 30,3 %, Estonia 33,2%, Finland 42,7%, Sweden 43,9%.
How optimistic are countries about V-shaped economic recovery?
Finland is rather positive. Figures of the Economic Survey Spring 2020 are cautiously predicting V-shaped economic recovery. The forecast assumes that the measures that limit economic activity will last for three months. The alternative calculation is also V-shaped but much deeper, restrictions are assumed to last for six months. In Sweden there is no clear consensus on this point. Even though most people hope for a V-shaped economic recovery, many believe at present that a U-shaped economic recovery is more likely. Estonia is optimistic and predicts fast recovery if the situation changes in the nearest future, but if the crisis lasts longer then a fast recovery is improbable. Country’s advantage of having the lowest public debt in the EU provides more flexibility for stimulus. Bank of Lithuania published V, U and L scenarios; however, the economists do not currently sound positive about the V version. This seems to be in line with scenarios for the global economy.
Speaking of government support for businesses, all countries seem to apply rather standard measures – loans, subsidies, guarantees for loans, possibilities to defer tax payment. Additionally, Finland, compared to other countries, seems to be offering more tools for business to find development opportunities in addition to focusing on measures for compensation of losses or ensuring liquidity.
When it comes to supporting people who lost their jobs, countries’ approaches vary as well. While Finland and Sweden took active steps to make access to unemployment allowances easier, Estonia and Lithuania maintained the existing settings. Also, new regulations are expected to come into force in Lithuania to provide so called “job search allowances” for those who are not entitled to regular unemployment allowance, as well as temporarily increasing the amount of employment allowance.
Aid for the self-employed seems to differ significantly. In Finland, for example, they may seek a one-time EUR 2.000 aid from municipalities to pay set costs, such as rents and administrative costs. In addition, they are also eligible for unemployment security that normally would not apply. In Lithuania, on the other hand, self-employed are entitled to allowances not amounting 50% of minimum salary during quarantine and 2 months after it is cancelled. Similarly to Sweden, support for vocational training, changing the type of activities, as well as some other forms of support are on the way in Lithuania.
Sweden and Finland have also loosened requirements for students to get the grants.
Smaller or bigger government aid is reaching the recipients. Subsidies for temporary idle time are being received in all countries. For example, EUR 136 237 353 were paid for 121 627 Estonian employees by the 17th of May. Of course, the numbers are changing daily in every country.
On a positive side, we are happy to note that COVID-19 forced authorities to make progress towards reduction of bureaucracy. Lithuania offered hot line 1824 for business inquiries regarding all government support related matters. Also, you may have noticed the move of certain services online, simplification of public procurement, construction formalities and other procedures. Sweden introduced temporary law facilitating holding of shareholders meetings. Estonians can now apply for medical leave online themselves. Finns overall are happy about the flexible and helpful attitudes of their authorities in corona times. Business Finland received over 26.000 applications for aid, made almost 15.000 decisions and granted support worth EUR 401.872.000 already.