As the impact on growth takes hold, attention turns to countries with fiscal space.
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Fiscal stimulus, lower rates, targeted measures for businesses or households: faced with the contamination of the economy by the coronavirus, governments and central banks around the world are administering various remedies.
Budget stimulus
Tax cuts or increased spending is a classic tool in the event of a crisis. Italy, the country most affected so far by the epidemic within the EU, broke its piggy bank on Wednesday and announced 25 billion euros to fight the epidemic. The same amount as the coronavirus response fund presented the day before by Brussels for the whole of the European Union.
As the impact on growth takes hold, attention turns to countries with fiscal space. So far, Berlin has earmarked € 12.8 billion over four years for infrastructure investment, and Chancellor Angela Merkel is now hinting that the answer to the crisis will come before the dogma of tight budgets.
The British government will spend £ 30 billion. In the United States, Congress validated an emergency plan of $ 8.3 billion, but the markets are faltering pending a vast program of economic and household support promised by President Donald Trump. Canada has released 1 billion Canadian dollars (640 million euros).
In Asia, Singapore unveiled financial aid worth 4.2 billion euros, and South Korea is considering an additional budgetary boost of 10 billion dollars.
China, the epicenter of the coronavirus that killed more than 3,100 people there, has promised a series of new measures, including lower taxes.
Lower interest rates
Central banks, omnipresent during the 2009 crisis, are on the bridge.
Last week, the Fed took a step it hadn’t taken since then: it cut interest rates in one fell swoop by 50 basis points. It was followed by that of Canada, which also lowered its rates by 0.5 points, and the Bank of England followed suit.
However, not all central banks have the same room for maneuver. The ECB or the Swiss National Bank (SNB) already apply zero or even negative rates and cannot lower them much more. ECB President Christine Lagarde is due to announce her arsenal on Thursday.
Target businesses, consumers, banks
The Chinese central bank (PBOC) released extensions or renewals of business loans in late February. The Bank of England, saying its action was “concerted” with that of the government, will ease financial regulation so that banks can finance the real economy.
Different countries have announced measures to support businesses, particularly in the hardest hit sectors such as tourism. In Sweden, for example, the government wants to extend a measure that cuts workers’ working hours and wages while avoiding layoffs.
Rome will thus use its envelope to help Italian borrowers, in particular through the suspension of payment of certain maturities of mortgage and bank loans.
Japan has released € 13.4 billion to make interest-free loans to small and medium-sized businesses.
Support can also manifest itself through compensation systems for quarantined employees. In Spain, the latter will be considered to be on sick leave. In France, employees forced to keep their children due to the closings of nurseries and schools can also be supported financially.
Coordination, what coordination?
So far, states and central banks have drawn their scattered announcements, where economists are calling for better coordination.
“We need a coordinated response across borders, be it containment and economic recovery,” said Charlie Netherton, head of client advisory for Marsh Risk Consulting.
But in the end, “to be frank, no fiscal or monetary stimulus can have the same impact as a vaccine against COVID-19,” said ING bank.
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