Category Archives: Economics

EU members clash over pandemic economic rescue package

Posted on by

France and Netherlands at odds on finance ministers’ €500bn compromise

France and the Netherlands have openly clashed over the meaning of a messy compromise struck by finance ministers which has unlocked a €500bn (£438bn) pandemic rescue package for European economies but left major issues unresolved.

Hours after a breakthrough was secured late on Thursday evening to allow immediate support for businesses and healthcare systems, it became clear on Friday that there remained bitter divisions within the EU over the longer-term task of rebuilding the European economy.

Continue reading...

EU strikes €500bn relief deal for countries hit hardest by pandemic

Posted on by

Compromise reached after Netherlands relents on ‘economic surveillance’ of beneficiary nations

A messy compromise to unlock €500bn (£438bn) of EU support for countries hit hardest by the coronavirus pandemic has been struck after Italy’s prime minister, Giuseppe Conte, warned that the existence of the bloc was at stake.

EU finance ministers on a video conference call struck a deal late on Thursday after the Netherlands shifted on a demand for “economic surveillance” of countries benefiting from €240bn of credit lines via the European stability mechanism, a bailout fund for struggling member states.

Continue reading...

Blindsided: how coronavirus felled the global economy in 100 days

Posted on by

A singular event has economists asking the same questions as everyone else: how far is there to fall – and can we ever get back?

It is New Year’s Eve 2019 and around the world stock markets are closing for business on a high note. Shares in the US are up by almost 30% on the year, those in Japan by 18%. Even in Britain, where the mood has been dampened by months of Brexit uncertainty, the FTSE 100 has risen by 12%.

Overall, it had been the best year for stocks since 2009 and traders saw no real reason why the party should not continue into 2020. The US and China looked close to an armistice in their trade war, the US central bank was stimulating the world’s biggest economy, and Boris Johnson’s decisive victory in the general election had removed any lingering doubts about whether Britain would leave the European Union.

Continue reading...

Global leaders urge G20 to tackle twin health and economic crises

Posted on by

Letter calls for $8bn emergency fund to bolster health systems in world’s poorer countries

A group of 165 global leaders has called for immediate and coordinated international action to tackle the twin health and economic emergencies caused by the Covid-19 pandemic.

Past and present politicians – including three former UK prime ministers – joined academics and civil society representatives to warn the G20 that the virus will return unless urgent action is taken to bolster health systems in poor countries of Africa and Latin America.

Continue reading...

If coronavirus sinks the eurozone, the ‘frugal four’ will be to blame | David Adler and Jerome Roos

Posted on by

The Dutch-led opposition to a ‘coronabond’ to raise funds for nations hardest-hit by the pandemic is self-defeating

Last Thursday, the leaders of the European Union convened a video conference to deliberate the escalating Covid-19 crisis. On the agenda was a simple proposal co-signed by nine different eurozone governments: the “coronabond”, a new type of public debt instrument backed by all the members of the currency union as they come together to combat the virus.

After a long decade of crisis fighting in the eurozone – pitting north against south, creditor against borrower – the proposal marked a rare display of unity, and the meeting was a perfect opportunity to ratify it. Issued collectively, the “coronabond” would drive down the borrowing costs of some of Europe’s most heavily affected countries, staving off another sovereign debt crisis and freeing up much-needed resources to invest in public health and economic recovery. “We are all facing a symmetric external shock,” the proposal read, “and we are collectively accountable for an effective and united European response.”

Continue reading...

Stock markets rally after Federal Reserve starts printing money

Posted on by

Dow Jones has best day since 1933, with Asian and European markets also up, after US move

Global stock markets staged a strong rally on Tuesday as investors were buoyed by the Federal Reserve’s efforts to boost the US economy and the prospect of Congress backing a fiscal stimulus package.

The Dow Jones recorded its best day since 1933 as it gained 11.4%, or 2,113 points, while the FTSE 100 posted its highest ever gain, of 452 points, as it rose 9% to 5,446.

Continue reading...

Urgent call to head off new debt crisis in developing world

Posted on by

Covid-19 crisis is raising borrowing costs for poorer nations just as commodity exports, tourism and remittances sent home fall

Rapid action is needed to head off the risk of a new debt crisis in the world’s poorest countries amid evidence that the Covid-19 pandemic is raising borrowing costs and hitting commodity exports, according to a leading campaign group.

A Jubilee Debt Campaign report said some of the world’s most vulnerable nations were being hit by a double whammy of increasing debt interest bills and the tumbling price of oil and other raw materials.

Continue reading...

Bank of England’s QE programme is bigger than the City expected

Posted on by

Quantitative easing stimulus is equivalent to almost 2% off interest rates

The Bank of England has gone all in. By cutting interest rates to 0.1% and announcing a fresh £200bn of money creation via its quantitative easing programme it has fired all the conventional weapons in its arsenal.

There will be some who say this is all reminiscent of the Beyond the Fringe sketch where Peter Cook demands “a futile gesture” to raise the whole tone of the war. Others will saythe Bank’s new governor Andrew Bailey had no choice given the state of the markets and the imminent lockdown in London. Bailey has had a good first week in the job.

Continue reading...

ECB U-turn shows it fears coronavirus could destroy eurozone project

Posted on by

Bank now realises Europe will sustain grievous economic damage from Covid-19

Weak. Clumsy. Behind the curve. The European Central Bank took stick for its initial response to the Covid-19 pandemic – and rightly so.

Those accusations can no longer be levied after the ECB used an emergency meeting to launch a gigantic new package of quantitative easing (QE) – the electronic money creation device that has become a key tool for central banks since the financial crisis of 2008.

Continue reading...

Peacetime constraints ditched in the war for economic survival | Larry Elliott

Posted on by

The Covid-19 outbreak is forcing politicians and central bankers to set aside ideology and orthodoxy to prevent a global collapse

It is as if the lights have been switched off. The global economy has been plunged into darkness as countries hunker down in response to the Covid-19 pandemic.

Most recessions develop gradually over time. When the last one started in 2008 it took the Bank of England six months to spot it. This time it is different. Then it was a financial virus, this time it is the real thing. Commentators often say the economy is hitting the wall or is falling off a cliff on the weakest of evidence. Today the cliches are horrifyingly true.

Continue reading...

Markets plunge despite coordinated action by central banks

Posted on by

Sharp losses recorded after US interest rate cut, as Bank of England hints at further support to combat turmoil

The FTSE 100 fell below 5,000 points on Monday and trading on Wall Street was suspended for the third time in a week as markets were gripped by mounting concerns over the threat of a global recession, despite a coordinated effort by central banks to protect growth and jobs.

In an escalation of the worst turmoil since the 2008 financial crisis, stock markets suffered further sharp losses on Monday despite dramatic action taken by the US central bank late on Sunday in an attempt to limit the economic impact of the coronavirus pandemic.

Continue reading...

Fed bids to shore up confidence after worst week in 12 years

Posted on by

Pledges of help from EU, China and Germany plus declaration of US emergency produce mild rally after torrid week

The world’s most powerful central bank, the US Federal Reserve, is preparing a fresh attempt to shore up investor confidence despite a late rally on Wall Street on Friday that ended a torrid week for stock markets on a more positive note.

Fresh pledges of help from China, Germany and the European commission combined with Donald Trump’s declaration of a national emergency over coronavirus to reassure investors after an ordeal for equities on both sides of the Atlantic that echoed the depths of the banking crisis.

Continue reading...

Budget 2020: read the small print on spending pledge, urges IFS

Posted on by

Thinktank praises Covid-19 response but says ‘splurge’ relies on already announced plans

Rishi Sunak’s first budget is not as generous as it seems and will leave many Whitehall departments worse off than they were before the spending squeeze began in 2010, according to Britain’s foremost economics thinktank.

The Institute for Fiscal Studies said the chancellor made the budget sound more substantial than it was, while relying on previously announced spending plans.

Continue reading...

Wall Street ends 11-year ‘bull market’ as coronavirus fears spread

Posted on by

US stock markets have been on an unprecedented streak since 2009, a bull market of gains

Wall Street’s record-breaking 11-year “bull market” came to an end on Wednesday as fears about the spreading Covid-19 pandemic hit stock markets again.

US stock markets have been on an unprecedented streak since 2009, a bull market of gains. On Wednesday investors sold off shares across all sectors after the World Health Organization declared the outbreak a pandemic for the first time and criticized “alarming levels of inaction” by governments in corralling the virus.

Continue reading...

Coronavirus live updates: Italy-wide lockdown comes into force

Posted on by

UK and US had worst days trading since 2008 GFC; Global cases near 110,000; Grand Princess passengers disembark. Follow the latest news.

As the whole of Italy goes into lockdown, there are some reassuring signs that measures are starting to work. Across the 11 towns that went into quarantine over two weeks ago, the number of cases is beginning to fall.

Virgin Atlantic has called on the European Commission and UK flight slots co-ordinator to relax rules amid the coronavirus outbreak, PA reports.

Chief executive Shai Weiss said: “Last month Virgin Atlantic and industry partners committed to achieving net zero carbon by 2050.

Continue reading...

Coronavirus live updates: fifth death confirmed in UK, as head of New York’s airports tests positive

Posted on by

With cases spiking sharply across Europe and emergency measures in place from California to Saudi Arabia, investors have sent shares tumbling

US authorities are planning a flight tomorrow to repatriate Britons on the coronavirus-hit Grand Princess cruise ship.

The UK Foreign Office issued the following statement:

We continue to work closely with the US authorities to repatriate British nationals on board the Grand Princess. The US are currently planning for a flight to leave tomorrow evening, returning to the UK on Wednesday afternoon. We remain in contact with all British nationals on board and will continue to offer support.

Chinese authorities reportedly scrambled to move people out of quarantine hotels which need full safety inspections after the deaths of at least 10 people in a collapsed hotel.

Joanna Davison, an English teacher, and her partner were suddenly placed in enforced isolation in Shenzhen after a ferry trip about 10 days ago. On Thursday, she told the Guardian she endured a “terrifying” experience as five people in hazmat suits came to test them at her home before they were whisked to quarantine.

Continue reading...

Oil price plunges 20% as Saudis vow to step up production

Posted on by

Move follows Russian refusal to join Opec-led production cut aimed at keeping prices high

The price of crude oil has plunged by more than 20% after Saudi Arabia, the world’s top oil exporter, said it would step up production from next month, flooding global markets and most likely depressing petrol and diesel prices.

Brent crude futures slid 30% to $31.02 a barrel in chaotic trade on Monday morning, before recovering slightly to $36.06, a drop of 20% on Friday night’s close. It was the worst one-day fall for brent since the start of the first Gulf war in 1991. US crude fell 27% to $30.

Continue reading...

World Bank accused over ExxonMobil plans to tap Guyana oil rush

Posted on by

Washington DC-based bank grants funds to redraft south American state’s oil laws by lawyers linked to oil giant

The World Bank is to pay for Guyana’s oil laws to be rewritten by a legal firm that has regularly worked for ExxonMobil, just as the US producer prepares to extract as much as 8bn barrels of oil off the country’s coast.

The World Bank has pledged not to fund fossil fuel extraction directly, but it is giving Guyana millions of dollars to develop governance in its burgeoning oil sector, as the south American country prepares for an oil rush led by ExxonMobil and its partners.

Continue reading...

Sunak to unveil budget aimed at helping firms deal with coronavirus

Posted on by

Chancellor mulling measures including tax holidays and support when staff self-isolate

Rishi Sunak is poised to announce a package of emergency measures to support businesses hit by the knock-on effects of the coronavirus crisis in his first budget on Wednesday.

The chancellor is considering short-term tax holidays for affected businesses, and taxpayer support for small businesses whose employees self-isolate as the outbreak escalates, the Guardian understands.

Continue reading...

Will coronavirus trigger a global recession? | Jeffrey Frankel

Posted on by

World economy’s prospects look bleak owing to Covid-19 outbreak and Donald Trump’s trade policy

At the start of this year, things seemed to be looking up for the global economy. True, growth had slowed a bit in 2019: from 2.9% to 2.3% in the US and from 3.6% to 2.9% globally. Still, there had been no recession and as recently as January, the International Monetary Fund projected a global growth rebound in 2020. The new coronavirus, Covid-19, has changed all of that.

Early predictions about Covid-19’s economic impact were reassuring. Similar epidemics – such as the 2003 outbreak of severe acute respiratory syndrome (Sars), another China-born coronavirus – did little damage globally. At the country level, GDP growth took a hit but quickly bounced back, as consumers released pent-up demand and firms rushed to fill back orders and restock inventories.

Continue reading...