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Terror in Europe

Terrorism And The Economic Cost Of Fear

Research suggests that sustained terror attacks over time deal a crippling blow to economies, but a single act of appalling violence, like the Nov. 13 attacks in France, may have fewer lasting effects than one might think.

Empty seats on a Parisian cafe terrace
Empty seats on a Parisian cafe terrace
Jean-Marc Vittori

PARIS — Empty stores, canceled concerts, deserted hotels. Though the signs of the potential economic fallout triggered by the Nov. 13 carnage are already visible, it is not so clear what the real impact will be.

Economists concede that they are not sure how to forecast the economic consequences of such an event on a local or national economy. After Sept. 11, 2001, the number of domestic airline passengers dropped 10% in the United States and even more on international flights. The 2008 terrorist attacks in Mumbai, which killed nearly 200 people, weighed on tourism in India. In some of the latest research published before his death in 2014, Nobel Prize-winning economist Gary Becker calculated that the bombing of an Israeli bus caused a 30% drop in passengers over the following days. Certain sectors can be seriously impacted by a terrorist act, for days or even years.

But at the macro level, the impact is barely discernible. In late 2001, many economists argued that the attacks of Sept. 11 would rush the United States further into recession. In fact, the country was already emerging from it, and the dramatic events did nothing to reverse the economic turnaround.

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Paris' Tuileries Garden — Photo: Trinh Nguyen

But the situation is totally different when attacks repeat over time at short intervals. That's when we pay the bill of fear. Research on the Basque Country in northern Spain, which was subjected to constant terrorist attacks over 30 years with more than 800 victims, estimated per capital income losses at 10%.

The multiple attacks in Egypt and Tunisia have clearly undermined the growth potential of both countries. But again, these results can't be extrapolated to France — at least not yet. There is no evidence for now that the country will be subjected to a series of attacks as large-scale as those suffered by the Basques or Tunisians. And while a series of attacks could affect tourism, locals won't stop eating out or going to museums.

We can argue about whether France is at war militarily or politically. But so far this isn't the case economically.

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Economy

Europe's Winter Energy Crisis Has Already Begun

in the face of Russia's stranglehold over supplies, the European Commission has proposed support packages and price caps. But across Europe, fears about the cost of living are spreading – and with it, doubts about support for Ukraine.

Protesters on Thursday in the German state of Thuringia carried Russian flags and signs: 'First our country! Life must be affordable.'

Martin Schutt/dpa via ZUMA
Stefanie Bolzen, Philipp Fritz, Virginia Kirst, Martina Meister, Mandoline Rutkowski, Stefan Schocher, Claus, Christian Malzahn and Nikolaus Doll

-Analysis-

In her State of the Union address on September 14, European Commission chief Ursula von der Leyen, issued an urgent appeal for solidarity between EU member states in tackling the energy crisis, and towards Ukraine. Von der Leyen need only look out her window to see that tensions are growing in capital cities across Europe due to the sharp rise in energy prices.

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In the Czech Republic, people are already taking to the streets, while opposition politicians elsewhere are looking to score points — and some countries' support for Ukraine may start to buckle.

With winter approaching, Europe is facing a true test of both its mettle, and imagination.

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