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Finance chiefs vie to inoculate world economy against virus

Published on 18/03/2020

Governments and central banks are injecting eye-popping sums and emergency policy remedies into the global economy as the coronavirus pandemic upends all normal life.

overnments and central banks are injecting eye-popping 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 families.

The package is in addition to $100 billion directed at paid sick leave and expanded unemployment benefits already moving through Congress.

A bailout for US airlines could also be in the works, after Mnuchin said they face a crisis now “worse than 9/11”.

The Federal Reserve has taken interest rates down to virtually zero, and massively increased cash injections into financial markets, including an additional $1.5 trillion last week and $1 trillion so far this week.

The US central bank also unveiled a new credit facility to help households and business stay afloat, while President Donald Trump has shifted his tone after downplaying the outbreak for weeks, now appealing for bipartisan support.

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 International Monetary Fund is making $50 billion available for poorer countries, and has appealed for a “global response” of the kind seen after the 2008 crash.
7 leaders including Trump on Monday vowed to “do whatever it takes, using all policy tools” to safeguard growth, but offered no concerted action plan.
20 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.

Dusting off their own playbook from 2008, the Fed, European Central Bank (ECB), Bank of Japan and others on Sunday announced measures to try to keep dollars pumping through the global economy.


After China, Europe is now the epicentre of the COVID-19 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 government-backed loans worth £330 billion ($400 billion).

President Emmanuel Macron of France, which is now on total lockdown, said Monday the government would ensure that all bank loans to companies are backed by a state guarantee totalling 300 billion euros.

The French government announced a separate aid package worth 45 billion euros to help businesses and employees cope.
ermany has unveiled 550 billion euros in government-backed 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 euros ($380 billion) in cash flows.

Spain plans to guarantee up to 100 billion euros in corporate loans.

For the European Union as a whole, finance ministers pledged Monday to fight the coronavirus “war” but declined for now to tap up the European Stability Mechanism, the eurozone’s 410 billion euros war chest.

The ECB is reviving crisis-era 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 US$11 billion spending plan — equivalent to just under one percent of GDP — to help avert its first recession in 29 years.

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.

The Bank of Japan, bringing forward its latest policy meeting to Monday, said it would double its annual capacity to buy exchange-traded funds and property investment funds.

Hong Kong’s government is giving a cash handout to every permanent resident, with a recession brought on by months of political protests now exacerbated by the coronavirus.