Madrid’s Restaurants Face a Hard Road in the Post-Covid World

a shouty police drone. Now the restrictions are starting to be lifted, and we have a great report for you from our Spanish economy reporter Janette Newman as she reunites with friends and finds out whether her local restaurants can possibly stay in business serving a fraction of the usual number of customers at tables two ms apart. We're also going to hear from our Nordic economist Johanna Jeanson in Stockholm about the very different approach that Sweden has taken

to COVID nineteen. This week, the main architect of Sweden's lighter lockdown policy admitted the death toll in his country had been too high. If he were facing the same crisis today, he told Swedish radio he would take a tougher line, whether it was right or wrong. Johanna says it's not true that Sweden acted as it did to

protect its domestic economy. You can decide what you think in a few minutes, but first, here's Jeannette with the sound of Madrid reopening, and please do not adjust your set. I cursed that sound every morning for about six years, a nearby shop owner rolling up the metal shutters covering his storefront a screeching start to every day. But for two months or in the confinement in the center of Madrid where I live, the mornings were silent, so we're

the afternoons and evenings. The screeching started again about two weeks ago. The sound still grates on me, but I have a bit of a soft spot for it. Now it's become a daily reminder that the city and the broader Spanish economy are coming back to life. Spain's government is gradually lifting one of Europe's strictest lockdowns in four stages, province by province, and in fourteen day increments. It's as if those of us living in Spain had been forced to go on a fast for two months, and now

we're slowly reintroducing some of life's pleasures. First, a bicycle ride outside, then visits with friends and family, eating and dining out. Eventually travel in Madrid were in the second week of what's known as AS one. Most noticeably, that means madri Lanos have been allowed to drink and dine outside at bars and restaurants the first time since mid March. The sounds of the city are slowly returning. That's this Sunday before we entered Phase one. It's PM on the

Plasa Santana, a square in central Madrid. And this is the next night in the same spot at the same time, but now with outdoor seating on the terraces at fifty papacity. We're also allowed to gather with up to ten people at home. That's meant reunions with friends for the first time in months. I visited friends for dinner on Friday, our first gathering since March. Hello, Hello, I get that the shared meills have been a welcome respite after the

long confinement. This is a celebration. The overpowering feeling, though, is one of whiplash. Spain is a national mourning for the more than twenty seven thousand people who have died during the pandemic, and the country along with the rest of the world is emerging into the most severe downturn in living memory. Bloomberg Economics expects Spain and Italy to be among the hardest hit countries in the world this year, suffering economic contractions of eleven and respectively. That's fueled anger

and despair. Some in Spain have channeled their frustration into a nightly cacophony that's known as a castro lada. That's the banging together of pots and pans, a common form of protest here. Every night for the past several weeks, people have been making noise from their windows, balconies and local plus us at nine pm. They're demonstrating against Spain's government, a coalition between the center left Socialists and the far

left PODE. Most party protesters say the government responded slowly to the onset of the pandemic and that the emergency economic measures have been too little, too late. Now that we're allowed to gather with friends, many people seem to prefer to be outside their homes in the evening, So the intensity of the castro ladas has eased in recent days, but the frustrations and worries haven't. I have like a hundred messages that I have to tell. It's like two

hours and then it's like it's better enough. Ophelia Marine opened three of her seven restaurants in Madrid last week. At this stage, only outdoor seating is allowed, and only at fifty capath city. She says the authorities are focusing too much on the minutia. They're missing the existential threat facing many of Madrid's restaurants and bars. We spoke at one of her restaurants, Lamul Cartman. In one of the locations,

we had um twenty three tables. Okay, so now you have two cuts by half, twenty three by half, it's eleven and a half. So okay, we said we're gonna put twelve. You know, it's a big exactly, it's a big platfor we have space, it's beautiful. Not many cars, not many people. So the police comes and they removed one of them. So they had they had definitely counted exactly how many. Yes, yes, but doesn't make any sense

for who what good that makes. Spain also requires restaurants to keep tables a socially distanced two apart that's about six and a half feet. Ophelia says. The number seems arbitrary. In France, social distances one meter. In Italy it's one meter in some regions and one point eight in others. In Germany one point five meters, the World Health Organization says one. Spain's government says the restrictions on occupancy and distance between patrons are necessary to ensure the country avoids

new outbreaks. Restaurant managers say they support safety measures, but they say the current restrictions make it impossible to generate enough revenue to cover the cost of reopening. That's one of the reasons that more than two thirds of the bars and restaurants in Madrid that are allowed to open their outdoor terraces have remained shuttered. The average bar size in Spain is around a hundred square meters roughly a

thousand square feet. The country's small, intimate eateries are part of its Old World charm, but there are distinct disadvantage in a socially distanced economy. Ophelia says she's worried that even when Madrid's restaurants can start serving inside, revenue will still suffer social distance. I think it's going to be till you know phase three four. Who knows but social distance. I think it's gonna stay for a while and which

that kills us. One option would be to step up online food deliveries, but that's not as common in Spain as in some other countries. Some restaurants have tried to pivot quickly to eat commerce, only to realize the commissions on existing platforms can be as much as thirty That's untenable in an industry where margins are on average around Madrid's Restaurant Association estimates that one in ten of the city's twenty bars and restaurants could go under by the

end of the year. That's a big deal in Spain's economy. Discretionary spending is a portion of economic output, meaning what people spend on food, drink and other leisure activities, is higher er than most other major economies. Also, restaurants and bars employ more people in Spain than in any other country in the European Union except Greece. That reflects, in part the vital role tourism plays in the economy. Spain was the second most visited country in the world last year.

Visitors are able to return starting in July, but hotel managers say they don't expect to get back to the glory days for at least several years. Spain's islands and beachside resorts are already receiving reservations for the truncated summer season. Many hotel managers in Madrid, though, say they're likely to remain shuttered through September. They won't be able to fill their rooms without the conferences and business meetings that normally bring people in July and August. Juan Luis de Lucas

Martin is an exception. The Hotel claud Age that he manages is among the few open in the city. Prince has been okay, Occupancy has been well horrible. Spaniards still aren't allowed to travel between provinces, with some exceptions. Those who have booked rooms at the cloud Edge have come to Madrid to see their doctors or lawyers, or in some cases meet up with a loved one. I understand all my colleagues. We have decided not to open until

September because there will be nothing we're opening. Nearly all the adults in Madrid are closed, and our records on the best day as Albin eighteen rooms booked. If Mortel were open, it would be absolute disaster. Because there's no demand. That's eighteen out of a hundred and fourteen total rooms. A lot of workers in the restaurant and hotel sectors

are expected to lose their jobs this year. That's one reason that Spain Central Bank expects the unemployment rate to hit around from an already high fourteen percent before the pandemic. The sudden loss of so many jobs has led the long lines at food banks around Madrid. Yolanda Waters Barsonia helps organize, is the one in her neighborhood of a Luche. When the virus came then it was just disastrous. All this very precarious and very unstable job was gone completely.

You land another volunteers feed around families each week. All of a sudden, we had people coming in saying, you know what, I have no job, I have nothing to eat, no money to pay the rent, no money to nothing. Many who show up worked as part time waiters, cleaning homes or taking care of the elderly, but some neighbors are too embarrassed to join the queue for the bags

of food. One day we saw somebody picking some fruit from that that's been behind this fruit shop here, and we told this man why don't you come, we have so much food and said, no, my wife doesn't want me to be there on the queue. We don't want we we can we we live here all our life. How can we be on that queue? So it's really humiliating, really really. Some of the waiters and other workers have been temporarily laid off, but they still haven't received their

furlough payments, so they can't pay their bills. Spain's furlough and unemployment system has been overwhelmed during the crisis. As the virus has slowed, it spread and Spain's economy slowly reopens, Yolanda says the number of new people queuing at the food bank has also slowed, but the future still remains bleak for many. Ninfa Sanchez Diaz had been working thirty hours a week taking care of elderly people in their homes. Since the pandemic, she's been working half at and isn't

earning enough money to pay rent or feed her family. Well, the future looks green if we have more quarant times and with social distancing, and with the number of elderly people who have died. I don't know what kind of hiring or firing or jobs will be available. I don't know what's going to happen. We'll live for today and tomorrow. We'll see. Amid so many and certainties, one thing seems clear. The V shaped recovery that economists had anticipated from many

countries now seems unlikely. In Spain and elsewhere. It will be more of a slog than a snap back. Jeanette Newman bloombergs so, Spain is one example of a European country now starting to emerge from from lockdown. But of course we know in Europe that Sweden has taken a very different approach, and I thought it was about time that Stephanomics found out a bit more about that from our Nordic economist, Johannah Janson. Johannah, very nice to have

you back on Stephanomics. Tell us a bit about Sweden. I mean, I think we are all familiar now with the idea that Sweden has had a looser approach to locking down the economy. That does seem to have helped sustain economic growth, at least in the first few months

of the year. But how are things looking now, Yes, that's right, I mean, it's it's it's really true that Swede has had a different approach, and the main difference I think is that a lot of the measures that are that are imposed here are voluntary, and I think that means that it may look a bit more lax seen from the outside than what we are experiencing here. But it is true that it is less strict than than in most countries. If we look at, for example,

that stringency index that Oxford Oxford University has compiled. Uh that index is around fifty in Sweden and it's eighty in other European countries. So so for sure that's less strict. And yes, you're right, Stephanie, it's been we've had less of a hit to the economy in the first quarter, when when most all the Nordics, Norway, Finland and also the euro Area countries took a large hit somewhere down to percent quardroom quarter, Sweden actually managed to eke out

point one percent growth. But but will we will take a hit in the second quarter, I'm sure of that, but it will probably be less less deep than we're seeing in in other European countries. And just thinking about global markets, I mean, we know that Sweden is a very exposed economy, very involved in global trade, has been affected by the downturn in the global economy. When you look at these sort of high frequency things, are you starting to see some some green shoots in terms of

the external activity or is it too soon? I think no, not in terms of the external activity. Actually, if we look at the when we look at those high frequency indicators, it's mainly that they've turned for the better. Firstly in terms of the number of new cases. We're seeing a slight downturn there. Secondly in terms of mobility domestic mobility, that people are daring to go to the store which they didn't do before, or they they're starting to take

their car to work. Um, they're still not h taking the subway, but they're taking their car to work. And we're seeing less financial stress. So these are the main three green shoots. But no, not in terms of external demand,

and I think those effects will linger for longer. If we look at UM it's not high frequency indicators, but it's relatively fast indecurations in terms of purchasing managers index for for the export sector, for example, we're seeing small fish hooks uh slight slight recovery, but quite an unimpressive recovery in the last figures, So there's still a worsening in terms of they're more companies seeing a worsening of them and worsening of order intake. But the worsening has

um has slowed down. That's where we are in terms of export demand. And not wanting to stray too far off economics, but I'm interested in how you and your friends and family have have thought about the so called Swedish experiment. Are people sitting in Sweden thinking, yeah, our government was very smart and very brave and they've taken the right decision, or or are there are there a lot of worries because obviously there has been a much higher mortality rate and a lot, no more cases than

in your Nordic neighbors. Yes, definitely. I mean I think in all countries there's been a debate on what to do and what not to do. And because this pandemic mixes economic reasoning with fear and worries about family and relatives, so there's been a lot of debate amongst sciences here and among citizens. But I think the reasons for Sweden's lacks approach has not been I mean, herd immunity has

not been the main reason. Neither has economics. It's more been an effect of the Sweden's constitution, which says that the government is not in charge here, it's the public health authority and they've they've taken the decisions. So and so that's been the thing, and also I guess a cultural thing that Swedes are. We're not We're not used to we're not imposing laws when it comes to containment measures. We're instead we're asked to work from home, we're asked

not to travel too far from our domicile. So and people seem to be adhering to those advice. But you're right, mortality has been higher. The last numbers show that mortality per million inhabitants here is around four hund and forty, which is four times higher than in Germany. It's less than in the UK, and it's less than in Italy for example, but much higher than in the Nordic neighbors and in Germany for example. So and that's been that's

also part of the debate. And in fact, now that the government has just said that they will open an inquiry into how this COVID nineteen pandemic has been handled, so the debate will continue. I'm sure that's very interesting. You said something I have to be I didn't know, which is that this is partly about because the public

health authorities have been the ones constitutionally in charge. Yes, So I think the outside, the perception and possibly particularly among people who thought that other countries should have taken this approach, was that Sweden had been very cool and calculated and was putting a long term view of the economy ahead of the short term human consequences, or very least weighing the two things in the short term somewhat differently. But the suggestion from what you're saying is this was

actually taken. This was a decision based on the long term yest public health costs and benefits. Absolutely, and I think a lot of this I mean, as I said, economics has never been cited as a reason for this more relaxed lockdown. Ah. And the Swedish constitution prevents the government from interfering in the strategy of independent administrative bodies that could be the RIX Bank, now it's the public

health authority. So yes, and it's also one the main argument i'd say is, as you say, the overall public health but also the egalitarian approach. For example, a Swedish schools. Primary schools have been kept open. Secondary schools have been closed in universities have been closed, but primary schools have been kept open. And the argument there is that it's much tougher for households are less well off to care for children at home and keep them get them back

into the schooling mode. One school is open again, and so that's been an important argument throughout this crisis. I'm slightly worried that we're going to come to the same conclusion that we always come to about, particularly about Sweden but also sometimes the other Nordic economies, that they do things better than we do, but we wouldn't be able

to do the same thing that they may be. So yes, well, I mean, because the conclusion you might draw is that, as usual, Sweden has turned out to be quite shrewd and smart in its approach, as well as having in quite a inclusive attitude to its citizens worrying about the

welfare of citizens. But it does rely, as you mentioned at the start, on people not only having that sense of fellow feeling but also doing what they're voluntarily encouraged to do, as opposed to told being told, you know, we can't help wondering that the voluntary approach to lockdown in the US and the UK would have been a bit less successful. Yes, one of my we may never know. But also I think a worrying sign though, is that

high mortality rate. That's that's going to be. I think once this year passes and once we see which countries have fared in total mortality, that will be like the final verdict over this how we've handled this pandemic, because as it is, as it stands now, this this relatively high mortality rate for Sweden must be seen as something that's that's not a success in this in this pandemic. I love the idea, Johanna, of the fish hook recovery.

You know, we've been talking about the bees and the ws, but of course our Nordic, our Swedish economist talks to us about fish hooks. I like it, Johanna, Thank you very much. We will, as you say, we will need to wait a year to see really, uh what how things have panned out, but I suspect we'll have you on the program before then. Thank you very much, Stephanie.

Thanks for listening to Stephanomics. We'll be back next week with more on how COVID nineteen is turning the global economy upside down, and remember you can always find us on the Bloomberg Terminal, website, app, or wherever you get your podcasts. This episode was produced by Magnus Hendrickson. Special thanks to Jeanette Newman, Johanna Jeanson, Laura Milan, and Thomas Galtieri. Lucy Meekin is the acting executive producer of Stephonomics and the head of Bloomberg podcast is Francesca Levy.