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Volcanic Ash Clouds EU Economy

Interviewee: Jacob Kirkegaard, Research Fellow, Peterson Institute for International Economics
Interviewer: Toni Johnson, Staff Writer
April 20, 2010

The eruption of Iceland's volcano Eyjafjallajokull has disrupted air travel across Europe for days, with no end in sight. Jacob Kirkegaard, a research fellow at the Peterson Institute for International Economics, says the airline industry, which had been looking forward to improving prospects following an upturn in the European economy, has been hit hard.

"Some of the airlines already at the brink of bankruptcies could collapse," he says. "I would certainly predict you will get calls for government bailouts or a kind of compensation coming from the airline industry and operators of major international airports in Europe." Kirkegaard also notes that, despite the advantages of the information age, business still relies on face-to-face contact. "When that opportunity to meet with international business [and] clients is all of a sudden dramatically curtailed, which of course a complete ban on air traffic entails, it's going to have an overall dampening influence on European GDP growth in this quarter."

The International Air Transport Association criticized the risk analysis behind the EU decision to close air travel, saying that other significant volcanic eruptions have not led to this level of travel disruption. Kirkegaard defends travel restrictions, noting, "The EU is not a region that is used to having a volcanic eruption," and other regions in the world "used to dealing with the fallout" may have had more data on which to base their decisions. Kirkegaard notes that going forward the EU is likely to take coordinated research and policy steps to address volcanic eruptions.

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