Facing an economic maelstrom that could be more painful than the 2008 financial crisis, world leaders are being urged to deliver a robust and co-ordinated fiscal response to shield companies and households from the impact of the coronavirus outbreak.
So far, however, national authorities’ proposals in response to the disease have lacked the pan-European synchronisation of the 2008 financial crisis. Then, the EU rolled out a €200bn spending programme co-ordinated by Brussels and EU member states, equal to 1.5 per cent of the bloc’s gross domestic product.
Other countries have sprayed their population with money, such as Hong Kong’s plan to pay HK$10,000 to every citizen. In Europe, however, few economists think this is the right moment for a big fiscal stimulus, given many EU states are in lockdown, with millions of people unable to go out and spend.
Eurozone finance ministers said they had agreed crisis-fighting fiscal measures worth 2 per cent of GDP, on average, for 2020 to support the economy, plus liquidity facilities of at least 13 per cent of GDP, consisting of public guarantee schemes and deferred tax payments.
Here are the main measures announced so far by some of the world’s biggest economies:
- The government is passing an emergency “supplementary” €156bn budget for 2020. This includes a €50bn plan to provide direct grants to small businesses and the self-employed who have lost access to bank credit. Companies with up to five employees will be eligible for a one-off payment of €9,000 for three months. Those with up to 10 employees will get €15,000.
- Berlin is also setting up a €500bn bailout fund to recapitalise big companies with more than 250 employees that get into difficulties due to the pandemic. It will also be empowered to take stakes in such firms.
- Landlords will no longer be able to evict tenants who fall behind on their rent due to the coronavirus crisis.
- The government has promised unlimited cash to companies facing liquidity problems in the form of loans provided by state development bank KfW. The state will be liable for 90 per cent of each loan, the companies’ own banks for the remaining 10 per cent.
- Berlin is expanding its programme of export credits and other guarantees to help companies in crisis, and will allow them to defer “billions of euros” in tax payments.
- The government is also expanding a state-subsidised scheme to compensate workers who are sent home by their employers during an economic crisis. Berlin expects some 2.35m people to be drawing the compensation, costing the Federal Labour Office €10.05bn.
- French president Emmanuel Macron has promised unlimited budgetary support for companies and employees affected by the coronavirus pandemic — a multipronged strategy that Bruno Le Maire, French finance minister, says will cost €45bn.
- Mr Macron launched the initiative, including an “exceptional and massive” mechanism to pay workers temporarily laid off by crisis-stricken businesses, in a speech to the nation. The corporate tax deferrals and support payments for workers are expected to be the most costly items in France’s array of measures.
- Mr Le Maire said ammunition to prop up the economy also included €300bn of French state guarantees for bank loans to businesses and €1tn of such guarantees from European institutions.
- Other moves include the possible rescue of companies with state shareholdings, such as Air France, deferred company tax and social security payments, and “sick leave” payments to parents who are not ill but have to stay at home to look after their children because schools are closed.
- The finance ministry was on Monday establishing a solidarity fund to manage some of the new subsidies.
- Roberto Gualtieri, Italy’s economy minister, has promised that “nobody will be left alone” as Rome starts distributing funds from the fiscal rescue package of up to €25bn.
- The main measures are to provide €1.15bn for the Italian health system and €1.5bn for its civil protection agency, which is in charge of organising the country’s coronavirus response.
- Other measures are expected to include one-off payments of €500 per person for the self-employed, government support for companies paying redundancy payments to their staff, a freeze on any worker lay-offs, and a cash bonus for Italians still working during the lockdown.
- The package is also expected to include loan guarantees for businesses hit by the crisis and a moratorium on loan and mortgage payments. However, the exact details of how these will be structured have not yet been made public.
- There will also be financial support for Italian families that have children at home, and for taxi drivers and postal workers who are continuing to work providing urgent services during the outbreak.
- The Italian government also said it would provide support to Alitalia, the national carrier to which the state has already provided €900m in loans since 2017.
- Spain’s government has announced what prime minister Pedro Sánchez has described as the “biggest mobilisation of resources in Spain’s democratic history” to fight the economic impact of the coronavirus crisis. The biggest part of the government’s plan is €100bn of state loan guarantees for business aimed at ensuring liquidity, especially for small and medium-sized companies.
- Other government commitments would amount to €17bn. The whole package, including private money triggered by the loan guarantees, would total €200bn.
- Mr Sánchez announced a moratorium on mortgage payments for people whose income has been hit by the crisis and a similar moratorium for utility bills.
- The decree also makes it easier for people to be temporarily suspended from work, rather than laid off, and to retain all of their benefits. Some social security payments will be suspended and there will be €600m to help vulnerable people and those depending on social services.
- A small group of top ministers — the prime minister, chancellor, foreign secretary, health secretary and cabinet office secretary — will oversee the UK economic response with a daily meeting arranged along wartime lines. The prime minister has said the government will “do whatever it takes to support our economy”.
- After three economic support packages of ever increasing size, the government has moved to a policy of trying to insulate the economy from the shutdown over coronavirus. The total cost is now unlimited, but the direct fiscal support offered is already at least £39bn and probably closer to £50bn.
- London has established a job retention scheme offering that all companies will be compensated in full for employment costs of up to 80 per cent of wage bills for workers they retain on payroll but are not working. This comes on top of large increases in welfare support for those out of work.
- Companies have been offered an unlimited package of loan guarantees, direct lending from the Bank of England for large companies and a one-year abolition of property taxes for all companies in affected sectors. Grants will be available for smaller companies.
- The chancellor added support for 95 per cent of the self employed to the UK’s programme, offering a monthly grant of 80 per cent of recent average profit capped at £2,500 to those running their own business. The payments will be made by June and will apply whether or not the self employed have been affected by the Covid-19 crisis
- The Trump administration and Congress agreed a $2tn stimulus package to help America cope with the coronavirus outbreak. President Trump signed the bill into law on Friday.
- The package includes income support of $1,200 per adult and $500 per child, which starts phasing out at $75,000 of annual income for individuals and $150,000 for couples. The Treasury is expected to send out direct deposit payments and cheques in the coming weeks.
- Small business loans worth $367bn to help small businesses cope with the immediate loss of revenue associated with the crisis. If the businesses retain the vast majority of their employees over the next six months they do not have to pay the money back.
- The legislation provides $454bn in funding for lending facilities managed by the Federal Reserve with the consent of the Treasury to help large and medium-sized business access capital during the crisis, by offering loans, loan guarantees and purchases of their corporate debt.
- The legislation also provides for $58bn in help to the airline sector through loans and grants. It also sets aside $17bn to help companies that are critical to maintaining “national security”.
- Reporting by Martin Arnold in Frankfurt, Guy Chazan in Berlin, Victor Mallet in Paris, Miles Johnson in Rome, Daniel Dombey in Madrid, Chris Giles in London and James Politi in Washington