How do at­tacks like those in Paris af­fect the world’s economies?

Alberta Venture - - The Briefing - CPIMAGES El­iz­a­beth Hames

>>> One year ago this month, two gun­men burst into a meet­ing at the of­fices of Paris-based satir­i­cal mag­a­zine Char­lie Hebdo and mas­sa­cred 11 peo­ple, plus three more on the streets. Mean­while, an­other group of gun­men opened fire in a Jewish kosher su­per­mar­ket, killing an em­ployee and three shop­pers.

The at­tacks rat­tled the world – but the mar­kets barely budged. The next day, the French CAC 40 was up 1.8 per cent. Sim­i­larly, stocks dove slightly af­ter ear­lier at­tacks in Madrid and Lon­don be­fore quickly re­cov­er­ing. Af­ter the Paris at­tacks on Novem­ber 13, in which 129 peo­ple were slaugh­tered by ISISlinked gun­men, Euro­pean mar­kets took an ini­tial hit, but quickly re­bounded. The price of oil in­creased slightly as in­vestors spec­u­lated about in­creas­ing geopo­lit­i­cal ten­sions.

If the mar­kets were the only mea­sure of im­pact, the ter­ror­ists would have ap­peared to miss their mark. But while the mar­kets are prov­ing re­silient, the ef­fects on the wider econ­omy can be great.

No mat­ter how you slice it, the fi­nan­cial blow of 9/11 was im­mense. A New York Times sur­vey es­ti­mated the im­pacts to range from $178 bil­lion for im­me­di­ate dam­age and eco­nomic im­pact, to $3.3 tril­lion, which ac­counts for the U.S.’s re­ac­tion to the at­tacks: in­creased na­tional se­cu­rity and $1.65 tril­lion for wars in Iraq and Afghanistan.

De­pend­ing on the in­ter­na­tional re­sponse, the cost of the at­tacks in France and any fu­ture ter­ror­ist at­tacks could also be sig­nif­i­cant. In Novem­ber, France ramped up its airstrikes against ISIS and called on its al­lies to do the same. And dur­ing the hol­i­day sea­son, as the world’s tourists steered clear of France, the coun­try’s tourism in­dus­try – which ac­counts for 10 per cent of its GDP – took a se­ri­ous hit. By the end of the year, Paris’ shop­ping dis­tricts looked like ghost towns com­pared to pre­vi­ous years and France’s hoteliers and air­lines had seen record cancellations. How­ever, tourism in­dus­tries in other coun­tries that have been hit by ter­ror­ism have re­bounded, and there’s lit­tle to sug­gest that France won’t share the same fate.

But there is one other threat to France’s, in­deed much of Europe’s, cof­fers, and that’s the threat to Europe’s open-bor­der econ­omy, one that is al­ready un­der pres­sure from the largest refugee cri­sis to hit Europe since World War II. Af­ter Paris, when the hunt for the sus­pects turned to Bel­gium, there were calls for an end to the Schen­gen area, the pass­port­free travel zone com­pris­ing 26 Euro­pean coun­tries. “What does it say about Schen­gen if one of the world’s most wanted crim­i­nals was able to move freely be­tween Syria, France and Bel­gium?” read a Novem­ber 23 edi­to­rial in the Ir­ish Times. “That was not sup­posed to be pos­si­ble.” Erect­ing bar­ri­ers be­tween th­ese coun­tries could not only hin­der the free move­ment of peo­ple, in­clud­ing the more than 400 mil­lion liv­ing within its bor­ders, but also the move­ment of goods. If that hap­pens, the ter­ror­ists will have hit a mark. –

The eco­nomic im­pacts of ter­ror­ism have so far been fleet­ing, but that could change

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