Governments pledge aid as global commerce seizes up
Governments and central banks are scrambling to find ways to keep businesses from going bankrupt as the virus outbreak grinds the world economy to a halt.
A day after Wall Street endured its worst daily drop since the crash of 1987, European markets wavered, as did US futures markets. There is tremendous volatility, with the extent of economic damage from the pandemic still anyone’s guess. Factories are closed, retail stores are closed, travel has ground almost to a halt and billions of people are sheltering at home, going outside only to find essential supplies.
Here is a look at how the outbreak is reshaping the global economy and how individuals, businesses and governments are responding.
GOVERNMENT AND CENTRAL BANKS: France’s government is pledging 45 billion euros ($50 billion) in aid for small businesses. That’s in addition to tens of billions already promised for French workers forced to stop working because of store and restaurant closures and strict new confinement measures. French Finance Minister Bruno Le Maire announced the new aid will include tax breaks and a “solidarity fund” for struggling small businesses. “This epidemic will be a catastrophe for all countries of the world,” he said. “The shock will be violent.”
The US Congress is rushing to develop an economic lifeline for American households and businesses turned upside down. Democrats said at least $750 billion would be needed. And top White House officials briefing Senate Republicans at the Capitol said a similar-sized package needs to pass, and in a matter of days.
Where to begin is an enormously complex question. Big industry and small business are looking at a complete, or nearly complete halt to operations. Restaurants that have been shuttered employ hundreds of thousands of people. Airlines are grounding flights, meaning no crews are needed. The dilemma afflicts every sector of the national and global economy. The risk of frozen economic activity will ripple outward, from the banking and mortgage industry, to services ranging from dog walking to doctors visits.
Sweden’s central bank will buy securities for up to an additional 300 billion kronor ($31 billion) and offer more loans to banks on favourable terms
The US Federal reserve on Sunday made an emergency cut to its key interest rate. US airlines are asking the government for grants, loans and tax relief that could easily top $50 billion. Other European governments have pledged tens of billions of euros (dollars) in aid and relief, as well as hundreds of billions in guaranteed loans.
BIG TECH: The biggest tech companies in the world are banding together to combat misinformation about the pandemic and also fraud. Facebook, Google, Microsoft, Twitter, Linkedin, Reddit and YouTube said in a joint statement that they will also attempt to disseminate across their platforms essential updates from government health organizations.
Misinformation and confusion in social media posts have been problematic for years. The spread of the coronavirus has exacerbated the problems for which Facebook and others were lambasted during the 2016 US presidential election.
HEAVY INDUSTRY: Volkswagen said it will close most of its European plants for two weeks due to uncertainty about demand for cars and supplies of parts. Chief Financial Officer Frank Witter said Tuesday that uncertainty about the severity and duration of the virus outbreak made it impossible to give a reliable outlook for sales.
Airbus will suspend production at its French and Spanish facilities for the next four days to implement tougher health and safety protocols, including more rigorous sanitation and enforced distancing between workers.
TRAVEL: Qantas, Australia’s largest airline, and Hong Kong’s Cathay Pacific Airways both cut international passenger capacity by 90 per cent. Qantas’s cuts will last until the end of May, Cathay Pacific’s apply in April.
American Airlines on Monday suspended about 75 per cent of its long-haul international flights and began grounding about 135 planes. It will cut passenger-carrying capacity in the US by 20 per cent in April and 30 per cent in May. Airlines are talking to unions about taking cuts in pay or hours, and some are cutting executive and management salaries.
MARKETS: Global financial markets wavered between losses and gains after a brutal sell-off to start the week that gave the US stock market its worst loss in more than three decades.
Benchmarks in Paris, London, Hong Kong and Sydney were mixed Tuesday while Tokyo’s benchmark was flat. US futures were essentially flat.
The 12 per cent plunge on the S&P 500 Monday took place amid a growing consensus, from Wall Street to the White House, that a global recession may be imminent. Entire sectors of national economies are at risk. The Philippine stock market shut down Tuesday after the government imposed restrictions on movement in the capital.