Boris Johnson wasn’t the only one being criticised for responding slowly to the social and economic crisis caused by the coronavirus.
The European Central Bank was also slow to act. Last week, when remarking that the ECB was “not here to close spreads”, bank chief Christine Lagarde caused a rapid spike in yields on Italian government bonds.
That misstep was partially redeemed on Wednesday (18 March) by the announcement of a new quantitative easing programme worth an additional €750 billion that should be targeted at the countries hit hardest by the pandemic.
Italy, already burdened by its high debts and suffering the highest number of coronavirus cases and deaths in Europe, is likely to take a correspondingly high economic hit. Without co-ordinated state intervention on an unprecedented scale, millions of Europeans will lose their jobs.
One of the differences between the response to the COVID crisis and the 2008-09 eurozone crisis is that this time, everybody believes that governments and central banks must do “whatever it takes” to shield businesses and workers from the worst of a deep recession. No bazooka is too big.
In Westminster on Thursday (19 March), the House of Commons saw a sight as surreal as the empty London Underground trains and bare supermarket shelves.
The most fiscally austere Conservatives berated their government, led by Johnson, for not offering more financial support to businesses facing the wall and their employees, after the government set out plans to offer firms more than €350 billion worth of state-guaranteed loans earlier this week.
Loans and bond-buying, by themselves, are clearly not the answer, especially for businesses who fear how long they will have to survive before things return to some kind of normality. Cash needs to go directly to the accounts of citizens or businesses.
The government should cancel or postpone VAT and other tax bills for businesses, provide wage subsidies to firms and offer a universal basic income to all citizens, said MPs, many of whom called on Johnson’s government to join the likes of France, Denmark, Sweden, Germany, Spain and Italy in making job protection a condition of state-backed support for firms.
The reality is that we are staring down the barrel of a deep recession. At the moment, the only speculation is about how bad.
Economists in the US and UK have warned of a potential 20% contraction while countries remain in lockdown. Once the official data comes out for those countries with the strictest restrictions on movement – Spain, Italy, France and Belgium – we will have a clearer idea of the carnage.
In the meantime, policy-makers must only work out the details of how, rather than how much, they are going to support citizens and keep businesses away from the abyss.
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The European Central Bank unexpectedly announced that it would spend €750 billion in bond purchases to calm down sovereign debt markets, in the strongest signal in the euro area to date that it was ready to fight against the economic fallout of the coronavirus.
As Europe has become the epicentre of the coronavirus outbreak, NATO is scaling down its military exercises to avoid a further spread but will continue its missions, NATO Secretary-General Jens Stoltenberg told a video news conference.
The launch of the new EU food policy, the Farm to Fork strategy (F2F), will be delayed at least by another month in light of a rescheduling of the Commission’s work programme due to the coronavirus outbreak.
Phishing emails, trojans and spam are now spreading over the Internet. Experts estimate that more than three percent of coronavirus websites that have been created since the beginning of the year contain malicious content.
Views are the author’s
[Edited by Zoran Radosavljevic]