The coronavirus is disrupting the global economy and the world is preparing to react. While China is preparing to restart, the West is discovering itself as weak and vulnerable as it has ever been: by now there are on the fingers of one hand the countries that have not yet thought about how to stem the economic shock that will inevitably overwhelm industry, commerce , consumption, savings, corporate health and public finances. Waiting for a European plan, for which there are high expectations after the "whatever it takes" promised by President Ursula Von der Leyen, individual countries are putting a heavy hand on their wallets.
Goodbye for a while, therefore, with a balanced budget and stability pact: "When the house burns, no one starts counting how much water is needed to put out the fire," summed up the French Minister of Public Accounts, Gérald Darmanin. Italy moved first with one 25 billion maneuver, capable of stimulating the economy by putting 350 into motion. Then it arrived France with a 45 billion plan. This is how the main European economies and the USA are organizing themselves.
FRANCE
The other evening, President Emmanuel Macron was clear: "We are at war". As mentioned, the French maneuver is worth 45 billion, with the priority of protecting workers and avoiding the bankruptcy of companies, even the smallest ones, which will benefit from tax and social security suspensions. In an interview with Les Echos, Minister Darmanin gave some more details: the debt/GDP ratio which will exceed the 100% threshold and the deficit/GDP which will approach 4% in 2020, compared to an initial forecast of 2,2%. Furthermore, GDP, initially expected to grow by 1,3%, will collapse to -1%. Two billion euros are intended to finance forced absences due to illness, the purchase of masks and the payment of overtime for healthcare personnel.
Of the total 45 billion, as many as 35 concern the state budget, in the sense that 12 billion in corporate taxes and over 1 billion in payroll taxes are suspended. At the moment, VAT and the French equivalent of Irpef remain outside (and therefore continue to be paid). Great effort also to relieve companies from paying contributions: we are talking about 8,5 billion which were due on 15 March and another 13 billion due on 5 April. A solidarity fund for micro-enterprises and VAT numbers is also envisaged: 1 billion a month, financed for three-quarters by the State and a quarter by the Regions. The equivalent of the extraordinary redundancy fund will cost another 5,5 billion in the next two months.
UNITED STATES
President Donald Trump, after denying the emergency, went wild: the White House is preparing a plan that could amount to 1.200 trillion dollars if necessary, including the rain distribution of 2.000 dollars to all citizens adults, within two weeks. The tycoon's energetic intervention has already received applause from Wall Street: for now, Treasury Secretary Steven Mnuchin has allocated a first tranche of 250 billion which could be followed by a second tranche of the same amount four weeks later, if there is still a national emergency. “Americans need money now, and the president wants to give money now. And I mean now, in the next couple of weeks,” Mnuchin confirmed.
In addition tohelicopter money the plan provides for 300 billion to be allocated to small businesses and substantial support for airlines, which are seriously at risk of bankruptcy (Trump specifically mentioned Boeing, calling it "the largest company in the world before the outbreak of the emergency", even if in reality the accounts were in the red after 20 years even before the coronavirus). The Federal Reserve had already moved in support of the federal administration, which he announced two auctions a day of 500 billion until Friday and dusted off a tool put in place with the Lehman Brothers crisis: the purchase of companies' commercial paper, to directly finance companies and not just banks. It should also be noted that for now, from the point of view of daily life, the US has not formalized a lockdown on the Italian-European model.
GERMANY
Angela Merkel's Germany is sailing on sight, which has so far postponed draconian measures being able to count on a health system that already makes 28 places available, many more than in Italy. However, the Chancellor has already accepted the idea that 60-70% of her citizens can contract the virus and that the emergency can last up to two years, so there is talk of doubling the number of beds in intensive care. The economic plan hypothesized by Berlin provides for a shock capable of moving the beauty of "at least" 550 billion euros, thus saying goodbye to the much-loved balanced budget. The indicative figure was said by the Minister of the Economy, Peter Altmaier, according to which in reality "there is no upper limit" to the credit that the KfW, the state bank for business support (the German CDP), will be able to make available to the system. At the moment there are no other details, but Berlin is also ready for anything.
In Germany, for the first time, Chancellor Angela Merkel has decided to address the nation with a televised address. For the chancellor, the battle against the coronavirus "is a historic challenge" and it will also count "how much everyone follows the rules with discipline". The health authorities have explained that it will take "months" to get out of it, but if the plan to minimize contacts fails, the infections could reach "up to 10 million".
And again: “The situation is serious and you must take it seriously. Never since Reunification, indeed since the Second World War have we faced a challenge that depends so much on our common sense of solidarity. The next few weeks will be even heavier. Our idea of normality, public and social life, everything will be tested like never before.
SPAIN
The Sanchez government plan, on the other hand, will be able to inject 200 billion into the system, i.e. equal to 20% of Spain's GDP, "more than what the state pays each year for pensions", writes El Pais. Of these 200 billion, 117 billion will come from public funds, the rest from the private world. The draft of the package aims primarily "to provide companies with all the liquidity they need," said Prime Minister Pedro Sanchez, with a line of guarantees up to 100 billion. In detail, the 45-page decree provides the moratorium on the payment of mortgages on first homes and on the homes of self-employed workers who find themselves in a situation of economic vulnerability, as well as for people affected by Covid-19.
The text includes a 100% exemption from contributions for SMEs that maintain employment and 75% for other companies, but these figures are always linked to staff retention. Support is also provided for the self-employed who suffer the collapse of their turnover, but the main measure for workers is the right to the collection of unemployment benefits even without having accrued the requirements, or without going to affect the benefits already accumulated. Workers are authorized to adapt their working hours, or even reduce them by 100%, when their presence is necessary to take care of relatives who, due to age, illness or disability, require personal and direct assistance. The exemption also applies to each parent with dependent children.
“This virus will not win – said the King of Spain Felipe VI in an address to the nation – We are stronger as a society… We are a society standing in the face of any adversity. We have to hold on and hold on. Comply with the recommendations of the health authorities to defeat the virus. Each of us is part of the solution to this crisis. Now we have to put our differences aside. We must unite around the same goal: to overcome this serious situation. And we have to do it together; together, with serenity and trust, but also with determination and energy".
UK
Belatedly, the United Kingdom also recognized the need to intervene. For now, no restrictive measures for citizens, but in return Prime Minister Boris Johnson has announced that he wants to proceed more rapidly in the coming days in actions to combat the coronavirus epidemic, acting with the government as in wartime to support the economy. This was echoed by Finance Minister Rishi Sunak, who invited banks to grant flexibility in loans in this phase of the economy affected by the effects of the epidemic. The package that Great Britain is putting in place is of 330 billion pounds: it is an unprecedented measure, Sunak and Johnson underlined.
Schools will close Friday afternoon indefinitely, although they will continue to care for the children of medical staff and at-risk children. The public exams for university entrance have been cancelled. Museums and theaters have been closed, while supermarkets have been stormed. Meanwhile, around 40 London Underground stations have been closed indefinitely to try to curb the spread of infections.
Last update: Thursday 19 March, 8:00
