You are here
World leaders will 'do whatever it takes' to safeguard growth
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.
Markets have crashed as world growth faces its biggest crisis since 2008, and have so far resisted the efforts to restore calm as the outbreak engulfs the West.
US Treasury Secretary Steven Mnuchin said officials were drawing up a package that could surpass US$1 trillion, on top of US$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 US$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 Mr 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 US$1.5 trillion last week and US$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, and is now appealing for bipartisan support.
In Canada, authorities are rolling out a C$10 billion (S$10 billion) credit package to help struggling businesses and have also cut interest rates.
The International Monetary Fund is making US$50 billion available for poorer countries and has also appealed for a "global response".
G-7 leaders including Mr Trump on Monday vowed to coordinate and "do whatever it takes, using all policy tools" to safeguard growth, but offered no specific action plans.
Dusting off their 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 (S$561 billion).
President Emmanuel Macron of France, which is now on total lockdown, said on Monday that the government would ensure that all bank loans to companies are backed by a state guarantee totalling 300 billion euros (S$472.2 billion). The French government announced a separate aid package worth 45 billion euros to help businesses and employees cope.
Germany 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 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 on Monday to fight the coronavirus "war" but declined for now to tap up the European Stability Mechanism, the euro zone's 410 billion euro 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.
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 (S$10.2 billion) in stimulus spending. Last week, Australia unveiled a US$11 billion spending plan - equivalent to just under one per cent of gross domestic product - 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 US$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. AFP