Finance chiefs vie to inoculate economy
GO V E R N M E N T S and central banks are injecting eyepopping sums and emergency policy remedies into the global economy as the coronavirus pandemic upends all normal life.
Markets have crashed as world growth faces its biggest crisis since 2008, and have so far shrugged off the stimulatory efforts as the outbreak engulfs the West.
AFP surveys responses by major economies as the coronavirus has spread from China to infect the rest of the world, enforcing national lockdowns and crippling businesses:
On Tuesday, US Treasury Secretary Steven Mnuchin said officials were drawing up a package that could surpass $1 trillion, on top of $300 billion in deferred tax payments.
The measures – far surpassing aid during the 2008 financial crisis meltdown – are likely to include direct cash payments to struggling fa milies.
The package is in addition to $100 billion directed at paid sick leave and expanded unemployment benefits signed into law by President Donald Trump on Wednesday.
A bailout for US airlines could also be in the works, after Mnuchin said they face a crisis now “worse than 9/11”.
The Federa l Reser ve has ta ken interest rates down to v irtually zero, and massively increased cash injections into financial markets, including an additiona l $1.5 t rillion last week and $1 t rillion so far t his week.
The US central bank also unveiled a new credit facility to help households and businesses stay afloat, while Donald Trump has shifted his tone after downplaying the outbreak for weeks, now appealing for bipartisan support.
Trump ordered the suspension of evictions and mortgage foreclosures for six weeks as part of the government effort to ease the pain.
Canada on Wednesday announced an aid package of Can$27 billion (US$19 billion) plus more in tax deferrals, and has also cut interest rates.
The Internationa l Monetar y Fund is making $ 50 billion available for poorer countries, and has appealed for a “globa l response” of t he k ind seen after t he 2008 crash.
G7 leaders including Trump on Monday vowed to “do whatever it takes, using all policy tools” to safeguard growth, but offered no concerted action plan.
G20 nations rallied together to combat the 2008 crisis, but the group has been absent from the triage effort so far this time.
Saudi Arabia, which holds the G20 presidency, is calling for an extraordinary leaders’ summit next week. As with all other gatherings now, it would be in “virtual” format.
After China, Europe is now the epicentre of the Covid19 coronavirus outbreak and governments have scrambled to open the spending taps while at the same time closing their borders.
British finance minister Rishi Sunak on Tuesday unveiled an “unprecedented package” of governmentbacked loans worth £330 billion ($400 billion).
President Emmanuel Macron of France, which is now under total lockdown, said Monday the government would ensure that all bank loans to companies are backed by a state guarantee totalling € 300 billion.
The French government announced a separate aid package worth € 45 billion to help businesses and employees cope.
Germany has unveiled € 550 billion in governmentbacked loans “for starters”, and suspended legal obligations for firms facing acute liquidity problems to file for bankruptcy.
In hardest-hit Italy, the government promised to deliver a “very strong injection of liquidity” into the financial system to generate € 340 billion in cash flows.
Spain plans to guarantee up to € 100 billion in corporate loans.
Poland on Wednesday unveiled a crisis-management package worth some € 47 billion to help the country weather the virus impact.
Turkey announced a $15 billion “Economic Stability Shield” including tax cuts for businesses and help for lowincome households.
The European Central Bank on Wednesday announced a surprise € 750-billion scheme to purchase government and corporate bonds to contain the economic damage from the virus.
Finance ministers had pledged Monday to fight the coronavirus “war” but declined for now to tap up the European Stability Mechanism, the eurozone’s € 410 billion war chest.
The ECB is reviving crisisera measures to encourage bank lending to beleaguered companies, but surprised the markets by keeping its borrowing rates on hold last Thursday.
Debate has also begun among eurozone members about creating “coronabonds”, which would be the first time members break a taboo about mutualising their debts.
China, ground zero of the virus outbreak with more than 3,000 deaths, has cut interest rates and vowed a range of measures including tax cuts and more fiscal transfers from Beijing to virus-hit regions.
New Zealand Tuesday raided its “rainy day” fund to release NZ$12.1 billion (US$7.3 billion) in stimulus spending.
Last week, Australia unveiled a $11 billion spending plan – equivalent to just under one per cent of GDP – to help avert its first recession in 29 years. On Thursday its central bank also cut interest rates to record lows.
Japan, which faces a huge financial hit from the possible postponement of the Tokyo Olympic Games this summer, is offering at least $15 billion in loan programmes for firms.
Hong Kong’s government is giv ing a cash handout to ever y permanent resident, with a recession brought on by months of politica l protests now exacerbated by the coronav irus.