Germany announces aid package worth USD166.5 bn, biggest since WW2
Germany has approved a massive and unprecedented financial aid package of 156 billion euro ($166.5 bn), the largest in the country since the Second World War, to offset the socio-economic damage caused by the coronavirus pandemic.
 
The stimulus package is designed to ease the burden on hospitals and clinics and supply financial aid to save jobs and companies that have been affected by the pandemic, reports Efe news.
 
"The corona pandemic is changing our whole lives," said Olaf Scholz, Finance Minister and Vice-Chancellor, said on Monday while explaining why the government was taking "the necessary and correct" step of unveiling such an enormous economic aid package.
 
"We will do everything we can to prevent this crisis from endangering the health care of our citizens or the economic processes in this country."
 
German authorities fear a severe recession due to the crisis, with the decline in Gross Domestic Product (GDP) expected to be "at least as high" as in 2008/2009, Minister of Economy Peter Altmeier warned while announcing a bailout fund of up to 600 billion euros for larger companies.
 
German Health Minister Jens Spahn, meanwhile, said that hospitals and clinics requiring additional staff, beds and equipment would receive financial support.
 
"If you need more beds, if you need more staff and equipment to treat coronavirus patients, you will be compensated financially," Spahn said.
 
Chancellor Angela Merkel attended the cabinet meeting from her home office, where she has been in quarantine since Sunday after coming into contact with a doctor who tested positive for coronavirus.
 
"She is simply in home office, as are many other people who have had to place themselves in self-isolation at home," Scholz told reporters.
 
"She is active: we had the cabinet meeting together this morning."
 
The Minister added that he would speak in Merkel's stead in the Bundestag lower house of parliament session on Wednesday.
 
Despite Merkel being forced into preventative isolation, Germany is "seeing signs that the exponential growth curve is flattening off slightly", said Lothar Wieler, the head of the Robert Koch Institute, on Monday, although he cautioned that a fuller picture would only be available from Wednesday.
 
Wieler said he was optimistic that social distancing measures taken last week and over the weekend, including the closure of schools and bans on all public gatherings, had helped to limit the virus's spread.
 
Germany has recorded 115 deaths out of more than 26,220 cases of the coronavirus, making it the fifth-worst affected country by number of infections, behind Spain (over 35,156), the US (46,371), China (81,545), where the virus originated, and Italy, which is now the epicentre of the pandemic with 63,927 cases and 6,077 deaths on Monday, according to John Hopkins University.
 
The COVID-19 disease has killed 16,557 people worldwide out of 381,499 confirmed cases. A total of 101,794 people have recovered.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
 

 

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    Coronavirus Crisis is Crushing GDP Growth. “We Are in Global Recession Territory,” says Fitch
    The global health crisis sparked by the outbreak of the coronavirus (COVID-19) is taking an extraordinarily heavy toll on the world economy. The coronavirus crisis is crushing global gross domestic product (GDP) growth and it would fall to 1.3% in 2020 from 2.7% in 2019, which would be weaker than global downturns in the early 1990s and in 2001, says Fitch Ratings.
     
    "For all intents and purposes we are in global recession territory," warns Brian Coulton, chief economist at Fitch Ratings.
     
    In its latest quarterly global economic outlook (GEO), the ratings agency have nearly halved the  baseline global growth forecast for 2020 - to just 1.3% from 2.5% in the December 2019 GEO.
     
     
    It says, "The revision leaves 2020 global GDP USD850 billion lower than in the previous forecast. But we could very easily see an outright decline in global GDP this year if more pervasive lockdown measures have to be rolled out across all the G7 economies. Emergency macro policy responses are purely about damage limitation at this stage but should help secure a 'V-shaped' recovery in second half (2H) of 2020, although this assumes that the health crisis eases."
     
    Talking about India, the ratings agency says, its scenario assumes the number of people affected will keep rising in the coming weeks but that the outbreak will remain contained. However, there are downside risks to this scenario in India, it added.
     
     
    According to Fitch, while India’s linkages with China, for example in trade and tourism are modest, domestic manufacturers are heavily reliant on key Chinese intermediate inputs – especially of electronics and machinery and equipment and supply-chain disruptions are expected to hit business investment and exports.
     
     
    It says, "The difficulties facing the Indian economy have been exacerbated by another bank failure (Yes Bank). Fragilities in the financial system will further undermine sentiment and domestic spending. The overall financial system remains burdened with weak balance sheets, which will limit any upside to credit and growth despite policymakers’ efforts in recent months to ease stresses."
     
    "Given downside pressures on growth, we think the Reserve Bank of India (RBI) will have to take additional measures and we forecast a cut in the policy rate to 4.5% before the end of the year. On the fiscal front, the authorities announced targeted stimulus measures to mitigate the impact of the outbreak. We see GDP growth to remain broadly steady at 5.1% in the fiscal year 2020-2021 following growth of 5.0% in 2019-2020," Fitch Ratings says in the report.
     
    As per Fitch, the COVID-19 shock to the Chinese economy has been very severe and its GDP is likely to fall by over 5% (not annualised) in first quarter of (1Q) 2020 and to be down by 1% year-on-year. It says, "Falling GDP in China is virtually unprecedented and, in the near term at least, these numbers look worse than most previous hypothetical 'hard-landing' scenarios. The good news is that the daily number of new COVID-19 cases in China has fallen very sharply, which should pave the way for a marked economic recovery in 2Q19 - high-frequency indicators already point to this starting in March."
     
    "Nevertheless, the delayed impact of supply-chain disruptions and lower Chinese demand on the rest of the world will continue to be felt profoundly for some time, particularly in the rest of Asia and the Eurozone," it added.
     
    Moreover, Fitch says, the rapid spread of the virus outside China has prompted sharp declines in travel and tourism, and the cancellation of business and leisure events worldwide as 'social distancing' takes hold. "And some other large advanced countries - most notably Italy and Spain and more recently in France, though after our forecast numbers were finalised have engaged in aggressive official lockdown responses similar to those seen in China. These countries are likely to see very sizeable outright declines in GDP in the coming months," it says.
     
    The interruptions to economic activity seen in China - and now in Italy - are on a scale and speed rarely seen other than during periods of military conflict, natural disasters or financial crises. While there is huge uncertainty, quarterly declines in GDP of 3% to 5% (not annualised) in a full lockdown scenario look feasible, Fitch says adding that the risk is that it shortly see these abrupt interruptions happening simultaneously across all major economies as the global pandemic spreads.
     
     
    "Our baseline global economic forecasts have been aggressively lowered. Even though we expect a recovery in China from 2Q20, Chinese growth is expected to fall just 3.7% for the year as a whole, down from 6.1% in 2019. We forecast Italian GDP to fall by 2% this year and Spanish GDP by almost 1%. Our baseline forecasts do not yet assume that full-scale lockdowns take place in across all the major European countries or the US (forecasts were finalised on 16 March). But even on this basis we now expect Eurozone growth to be minus 0.4% this year. The baseline forecast for US growth is 1% in 2020 compared with a pre-virus outlook of 2% and GDP is expected to fall by 0.5% (or 2% annualised) in 2Q2020," Fitch says.
     
    This, according to the ratings agency reflects the likelihood that travel, tourism, and business and leisure events will be disrupted for months, the collapse in the equity market, lower business and consumer confidence, and other disruptions to US economic activity that are emerging as authorities seek to contain the virus. 
     
    Fitch says, the high risk of escalating lockdown responses across the major economies means that the chances of a weaker outcome are very substantial. "A downside variant to our baseline forecast shows global GDP falling this year - an extremely rare occurrence in the post-war period - with GDP in Europe down by over 1.5%, US GDP down by nearly 1% and Chinese growth slipping to just over 2%," it added.
     
    The ratings agency's oil price forecast has been lowered to USD41 per barrel (Brent) for 2020 annual average from USD62.5 per barrel in the December GEO. It says, "With the collapse of 'OPEC+' co-operation boosting prospects for OPEC supply, we now expect oil prices to average USD48 per barrel in 2021 compared to our previous forecast of USD60 per barrel".
     
     
    Following a similar playbook to the global financial crisis, emergency macro policy responses are being announced on a massive scale by several countries. These include aggressive interest rate cuts, huge injections of central bank liquidity, macro-prudential easing and the creation of credit support facilities. Large-scale fiscal easing packages and the unveiling of hundred billion dollar-scale sovereign credit-guarantee schemes are also being used to help the private sector withstand shocks from measures necessary to contain the health crisis.
     
    "Rapid and large-scale macro policy responses are all about damage limitation in the near-term, but policy easing should help GDP normalise and recover quickly in the second half of the year on the assumption that the health crisis subsides," says Coulton, adding "However the uncertainties here are huge and we are really only at the beginning of the process of trying to understand the full impact of the crisis on the world economy".
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    Trump proposes sending cash aid directly to individual Americans
    US President Donald Trump has unveiled an unprecedented plan to send cash aid directly to most Americans to help them tide over the financial pain of the coronavirus pandemic that has disrupted the US economy and threatens large scale unemployment.
     
    The proposal made on Tuesday as a part of financial aid packages that could add up to $1 trillion appeared to have the support of both Republicans and Democrats.
     
    Trump and Treasury Secretary Steven Mnuchin did not reveal the specifics at a news briefing in Washington but in response to questions, they indicated that the amount could be in the range of $1,000.
     
    Mnuchin said some people like millionaires would be excluded from the handouts.
     
    Hundreds of thousands of Americans are expected to lose their jobs at least temporarily because of the closing of businesses under government orders and due to fall off in customers.
     
    Trump wants the cheques to reach the public "within two weeks", Mnuchin said.
     
    He said the administration preferred cash payments, rather than indirect payments through tax cuts or deferments, so the money could be sent out within two weeks.
     
    He said that the details were being worked out on the exact amount and how to get the money to the people "now."
     
    A group of Democratic Senators have proposed sending $4,500 to all Americans, indicating broad support for a payment plan.
     
    Mnuchin later met Republican Senators to push the payments plan and other parts of an economic stimulus package totalling $850 million.
     
    Of this, $250 million would be earmarked for loans to small businesses.
     
    Earlier, the House of Representatives had passed a $100 billion economic package, which the Senate is scheduled to take up this week.
     
    The stock markets that had registered a historic fall of about 13 per cent on Monday recovered somewhat on Tuesday regaining about five per cent.
     
    The financial urgency and scale of the proposed intervention exceeds government bailout package of $700 billion for banks after the 2008 economic crisis.
     
    Trump sounded upbeat about getting the rescue plan through Congress, saying "there's great spirit" among lawmakers.
     
    Trump said he wants to "go big to blunt the economic pain caused by the coronavirus. "I don't want to do incremental stuff and keep coming back to it," Trump said.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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