Coronavirus outbreak could push Europe into a downturn

FRANKFURT, Germany — So far, only scattered cases of the coronavirus have appeared in Europe, but the economic effects are proving harder to quarantine. The shock may be severe enough to push the vulnerable German economy, and perhaps the entire eurozone, into a recession.

That is the conclusion of a growing number of economists as it becomes clear that it will take weeks, at best, before the Chinese economy resumes its role as a prolific exporter of essential factory goods, and as an increasingly important consumer market for the rest of the world.

“The longer it takes for production to resume, the higher the risks,” said Jörg Krämer, chief economist at Commerzbank in Frankfurt.

For the chief executive of Daimler, one of Germany’s most prominent companies with several auto plants in China, the crisis is one of uncertainty.

“I’m calling China every day,” Ola Källenius said at a news conference in Stuttgart. “It’s too early to say if and how other factories could be affected. We are talking about global networks.”

The rest of the world could also suffer economically, the Federal Reserve chairman, Jerome Powell, warned lawmakers this week.

“We are closely monitoring the emergence of the coronavirus, which could lead to disruptions in China that spill over to the rest of the global economy,” Powell told House Financial Services Committee members.

The problems of German automakers’ reverberate around the continent, because so many small and midsize parts suppliers in countries depend on them for sales. Italy’s economy shrank in the fourth quarter in part because its industrial north is closely linked to Germany.

“For most countries, Germany is the most important trading partner,” said Carsten Brzeski, chief economist at ING Germany. “If it starts to slow down, other countries will feel it.”

Daimler and other carmakers were forced to keep their factories in China closed longer than planned after the Lunar New Year holiday, and the virus has kept people out of showrooms. On Monday, the company said it had begun gradually ramping up production.

But the situation remains tense and unpredictable. There is widespread concern that assembly lines around the world could be forced to shut down for lack of components made in China.

China has become a critical market for all German carmakers. Daimler sold nearly 700,000 Mercedes-Benz cars in China last year, more than twice as many as it sold in the United States.

Smaller companies are also affected. Many have factories in China that have been idle or operating far below capacity.

Ziehl-Abegg, a German maker of industrial fans, has a factory in Shanghai with 450 workers who produce air-circulation systems for hospitals, among other things. The highperformance fans have been in demand during the crisis.

Nevertheless, Chinese authorities allowed only a skeleton crew on the site last week to fill orders from newly built hospitals in Wuhan, Shandong and Shenzhen, said Rainer Grill, a Ziehl-Abegg spokesman.

Even after the Shanghai factory was allowed to reopen this week, fewer than half of the employees reported to work. They were under orders to stay home because they had visited affected areas of China during the Lunar New Year.

German machinery-makers like Ziehl-Abegg are coming off a terrible year and can hardly afford any more problems. New orders for products like machine tools or construction machinery slumped 9% in 2019 because of President Donald Trump’s trade war, Brexit and auto industry woes.

GIULIA MARCHI/THE NEW YORK TIMES A worker sprays disinfectant at a rail station in Beijing. Scattered cases of the virus have appeared in Europe.