News / Europe

Europe Looking Into Fallout From Volcanic Eruption

Economists, politicians begin to assess impact

Lisa Bryant

As Europe struggles to reopen airports shuttered by a vast cloud of volcanic ash, European economists and politicians are beginning to assess its impact on the economy.

European Commission chief Jose Manuel Barroso has ordered a comprehensive study on the impact of the volcanic ash cloud on the region's economy, but some of the fallout is easily apparent.

The full or partial closure of air spaces in about 30 European countries during the past few days has created havoc for the airline and tourism industries.  Airline companies say they are losing about $270 million a day.

Chief economist Simon Tilford, of the London-based Center for European Reform, says insurance and air freight companies, along with delivery companies like United Parcel Service are also taking a hit.

"Some of the most vulnerable people are actually some of the poorest.  So, if we look at the exporters of produce, much of which is flown from East Africa to Europe and the U.S. - they are going to be hit very, very hard," Tilford said.

European Union officials have been scrambling to find solutions.  E.U. transportation ministers are holding a video conference on the dilemma later on Monday.  E.U. Transportation Commissioner Siim Kallas says the ash cloud could be a bigger economic blow to the airline industry than the September 2001 attacks on the United States.  

"This is unprecedented.  Such a long time, such a big airspace, totally closed.  And this is something that cannot be very easily solved immediately," Kallas said.

Meanwhile, the air industry group IATA is calling for more flexibility in allowing some air spaces to open up.

Just how widespread and crippling the cloud's impact will be depends on how long it will linger, and how many countries it will affect.  But analyst Tilford doubts it will seriously hobble Europe's economic recovery following the financial crisis.

"Of course, it if went on for weeks or months, then it would have a not insignificant impact on the European economy, but I do not think it is going to," Tilford said.

And some sectors are actually benefitting from the flight chaos.  Business is booming for bus and rail transport.  And for hotels, filled with stranded passengers.

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