Economy Day: Resilience the Key to Being Prepared for the Next Crisis

On Tuesday 29 March 2022, the Economy Day was held at the Chamber of Commerce in Luxembourg-Kirchberg in front of a 200-strong audience.

Organised by Luxembourg's Ministry of the Economy, Luxembourg's Chamber of Commerce and FEDIL, in cooperation with PwC Luxembourg, the title of the event was "Facing crisis: where do we stand? Ready for the next one?" which aimed to undertake a strategic assessment of the situation and look forward, coming out of the COVID-19 pandemic and also taking into consideration the impacts of Brexit and the war in Ukraine.

Held mainly in English and sometimes in French, the event was split between the morning session which focussed on the pandemic’s economic and social impacts at global and local levels, and the afternoon session which focussed on the future, placing the COVID-19 crisis in a historical context and asking why this crisis was so unexpected, as well as examining the key lessons learned for the future.

John Parkhouse, CEO and Senior Partner at PwC Luxembourg, welcomed everyone to the first Economy Day being held face-to-face for the first time in three years, reminding them that the registration fees from the event will be going directly to UNICEF and their work regarding the crisis in Ukraine.

Carlo Thelen, Director General of the Chamber of Commerce, gave the opening address. He referenced the high volatility of international supply chains which were already stretched as a result of the pandemic and are now being tested again due to the war in Ukraine. He stressed that we have learnt a lot from the COVID-19 crisis, Europe has shown its resilience and we have reached a collective agreement built on a common resilience; however, experts are split on what will happen in the future. Inflation is rising, with natural gas prices rising 80% as an example. He said that we must presume that such inflation will continue as much of our energy supplies come from Russia. He added that environmental measure must go hand-in-hand, but this will not be easy while we develop a new energy model as we reduce our dependency on non-European Union (EU) energy sources and further diversify our economy.

Franz Fayot, Luxembourg's Minister of the Economy, first recalled a mission to Italy at the very start of the pandemic when very few people were out and about and secretly were hoping that it would not spread to other countries on Europe. He mentioned that both the pandemic and war on Ukraine were predictable, but we did not know when they would happen. Many societies put the health of the elderly and vulnerable members of society ahead the needs of the economy. He also mentioned that the war in Ukraine will change the world's geo-political balance, referencing too the impact on inflation and competitiveness. He stated that the EU moving together is a good thing, as is the decarbonisation agenda and the realisation in Europe that we need to build a new defence policy.

Adam Tooze, Economist and Professor of History and Director of the European Institute at Columbia University, gave the keynote address and spoke on the economic and social lessons learned from the COVID-19 crisis - at a global level. He started with what he called a sense of the surreal that we are experiencing; three months ago, he had accepted the invitation to speak at this event and he thought he would be talking about the pandemic; instead, the war in Ukraine started... He also referred to the crisis of democracy in the United States (US), one of a number of crises that have happened over the past few years. He referenced the financial crisis, the convergence of Ukraine towards NATO as well as the war between Armenia and Azerbaijan, all when we thought we were in the post-COVID agenda. He admitted that there are some disturbing similarities: we find it difficult to believe that something bad will happen - the only people that really thought that Russia would invade Ukraine were those in the military without any links to politics and economics. Similarly, the subprime mortgage crisis was obvious to those in the financial world; and we did not believe that "people like us" would die of infectious diseases, yet those in public health did. At an even deeper level, it is harder to believe that something terrible is going to happen to oneself, using Hurricane Dorian in 2019, the most powerful storm recorded in the western hemisphere. This was a precursor to eight lessons that he outlined:

1. Fix the stuff that is technically complex, but does not present wicked trade-offs (e.g. get bank regulation in order)

2. Accumulate (seemingly) redundant expertise. We don't know what we don't know (many people thought research on the SARS vaccine was a waste of money)

3. It isn't just the devil that is in the detail. The solutions may be there too (we did not see the small details of what was happening in Ukraine)

4. Don't discard old wisdom (it is a long time since the Cuban missile crisis of the 1960s but we have not forgotten)

5. But, whilst not forgetting old lessons, don't fight the last war (don't confuse old challenges with new challenges; COVID-19 is not the flu)

6. Strength in numbers and in alliances (there is logic for working in numbers; Latin American countries do not have a European Central Bank - ECB)

 7. For small countries, membership in larger alliances is essential (you may as well have a voice in the coalition setting the terms; Luxembourg punches above its weight due to the EU)

8. It is not over until it is over (staying "in the present" is easier said than done).

René Winkin, Managing Director at FEDIL, then joined Minister Fayot and Adam Tooze in a panel discussion moderated by Serge Allegrezza, Director General of STATEC and the Observatory for Competitiveness, examining the economic and social lessons learned from the COVID-19 crisis - in Luxembourg. They addressed the rebuilding of societies after multiple crises, mentioned that the term "unprecedented" has been used too often in recent times. Every government in the world took a stand, although not every one got it right. On this question why the EU, the world was so unprepared (for the pandemic), Minister Fayot referenced Bill Gates' YouTube video of 2015 in which he predicted that a pandemic would happen; however, we were not looking that way and were in denial for a while; the EU never had a coordinating role in health policy as this was up to Member States; collective action is the way forward. On the issues of global supply chains, Luxembourg will join EU-led supply chains instead of creating their own. They also addressed energy in terms of Russian imports and sustainability. Targeted inducements and targeted grants will be necessary in defined economic sectors; with that comes the standardisation of investment bonds, etc. We now what we have to do regarding cutting carbon emissions, quarter by quarter and relentlessly, with accountability.

After the coffee break, Tom Theves, First Government Counsellor at the Ministry of the Economy, led a panel discussion on "The COVID-19 crisis: What impacts for companies in Luxembourg? How did they experience the crisis?" with Tom Baumert, Director of the CLC, Michèle Detaille, President of FEDIL, Jacques Lorang, CEO at Luxcaddy, John Parkhouse, CEO and Senior Partner at PwC Luxembourg, and Tom Steffen, CEO at Groupe Steffen.

Before the lunch break, François Mousel, Partner, Clients & Markets Leader at PwC Luxembourg, summed up the morning's session.