BANKING & FINANCE: Finance chiefs vie to inoculate world economy against virus
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LONDON (AFP) – Governments and central banks are injecting eye-popping sums into markets and applying emergency policy remedies as they try to counter the impact of the coronavirus on the global economy.
The pandemic which has upended all normal life has seen markets crash as world growth faces its biggest crisis since 2008.
AFP surveys responses by major economies as the coronavirus has spread from China to infect the rest of the world, sparking national lockdowns and crippling businesses:
Europe is now the epicentre of the COVID-19 outbreak and governments have scrambled to open the spending taps while also closing their borders.
The ECB announced late on Wednesday a surprise EUR750-billion (USD820-billion) scheme to buy government and corporate bonds, boosting funds in the system so as to help contain the economic damage from the virus.
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The eurozone bank is reviving crisis-era measures to encourage bank lending to companies, but caused some disquiet last week by keeping its borrowing rates on hold.
Meanwhile the Bank of England (BoE) cut on Thursday its main interest rate to a record-low 0.1 per cent from 0.25 per cent, only eight days after having chopped the interest rate from 0.5 per cent. It also plans to buy an additional GBP200 billion (EUR220 billion, USD235 billion) in government and corporate debt.
Berlin has unveiled EUR550 billion in government-backed loans “for starters”, and suspended legal obligations for firms facing acute liquidity problems to file for bankruptcy.
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Britain is providing GBP330 billion of government-backed loans to businesses, while France will guarantee EUR300 billion in loans to firms and has announced a separate aid package worth EUR45 billion to help businesses and employees cope.
In hardest-hit Italy, the government has promised to deliver a “very strong injection of liquidity” into the financial system to generate EUR340 billion in cash flows.
Spain plans to guarantee up to EUR100 billion in corporate loans.
Switzerland’s central bank said on Thursday it would intervene more strongly to stabilise its franc, while Norway is also considering intervention as the krone plunges.
Russia is using its foreign currency reserves to prop up the ruble and is also compensating oil producers directly when oil prices fall below USD25 per barrel, as they did on Wednesday.
On Thursday Senate Majority Leader Mitch McConnell presented a USD1 trillion emergency relief package to combat the economic turmoil in the United States (US).
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The measure – far surpassing aid during the 2008 financial crisis meltdown – is likely to include direct cash payments to struggling families.
The package is in addition to USD100 billion directed at paid sick leave and expanded unemployment benefits signed into law by US President Donald Trump on Wednesday.
A bailout for US airlines could also be in the works, after US Treasury Secretary Steven Mnuchin said they face a crisis now “worse than 9/11”.
The Federal Reserve has taken interest rates down to virtually zero.
The US central bank also unveiled a new credit facility to help households and businesses stay afloat, while 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.
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On Thursday the Federal Reserve unveiled measures to help money market mutual funds, a popular investment tool, which has seen huge demand to exit as households and small businesses scramble for cash.
Canada on Wednesday announced an aid package of CAD27 billion (USD19 billion) plus more in tax deferrals, and has also cut interest rates.
The International Monetary Fund (IMF) is making USD50 billion available for poorer countries, and has appealed for a “global response” of the kind seen after the 2008 crash.
Saudi Arabia, which holds the G20 presidency, has called for an extraordinary summit of the group’s leaders next week. As with all other gatherings now, it would be in “virtual” format.
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