July 11, 2020

the auction of stimuli from governments and central banks




As the coronavirus expands, the main powers are approving different stimulus packages, making certain that in crises “we are all” Keynesians. With the epicenter still installed in Europe (especially, Italia and Spain) and with increasing force in United States or Latin America, the main economies together with the sacrosanct central banks load their “bazookas” to make the landing smoother and to anticipate a quick recovery to a recession, which can already be felt with the fingertips:

Spain: waiting for the “fine print”

Spain gave the green light a week ago to its own stimulus package for an amount of 200,000 million euros, 20% of Spanish GDP, the majority coming from the public sector (117,000 million) to support companies, the self-employed and workers against the impact of the coronavirus. In addition to giving the green light to a line of guarantees of 100,000 million (up to 200,000 million if we include the private sector). A week later, an important part of the “small letter”: For example, the conditions of the ICO guarantees for an amount of 100,000 million euros or how the Government will compensate parents who lose work hours for the care of their children.

Also, as ABC reported yesterday, the Government studies how to mitigate the impact of the crisis caused by coronavirus in people who live on rent or how to give more security to vulnerable groups like housemaids. All this, while the requests for help or the requests are accumulated: the last one, from the majority association of self-employed ATA, that exempts them from paying the March contribution. We will see. It is the turn of «social Tuesdays», of fright or treatment.

[Todos los detalles del Plan de Estímulos de Sánchez, aquí]

Italy: 25,000 million for Employment and Health

The European country most affected by the coronavirus, is already looking to the future and has just approved a first package of 25,000 million euros to help companies and families. Among the most outstanding decisions 3.5 billion that will go directly to strengthen the health system and the Civil Protection system. In addition, others 10 billion will go to support employment and, especially, to the payment of unemployment benefits, as well as for a luck of 600 euros of aid this month for the self-employed. The Italian package also includes measures similar to the Spanish one, such as the freezing of the mortgage payment, for those affected by this crisis or the suspension of taxes and fees for companies. Access to credit will also be facilitated and special help will be given to sectors such as tourism. Now this is just Conte I.

France: no bankrupt company

The neighboring country will mobilize up 300 billion euros in its “war” against the coronavirus, to save thousands of companies from bankruptcy. Specific, the Gallic State will assume the payment of the credits bank contracts and will suspend both the payment of social contributions and the payment of taxes. It is also contemplated to suspend the payment of services such as water, electricity or gas, although the scope of the latter has not yet been delimited (to the entire population or only to companies, for example).

United States: Uncle Sam takes out heavy artillery

The US “bailout” does not disappoint and will be spectacular: the Federal Reserve announced yesterday the unlimited bond purchaseThus, it goes one step further with respect to the reduction of rates to place them between 0% and 0.25% and breaks with the limit imposed just a few days before, when it announced “only” it would inject 700,000 million dollars. It’s not the only thing: It will also create a cheap line of credit for SMEs, as well as the acquisition of securities backed by the mortgage market. Music to Trump’s ears.

Precisely, the President of the United States, has also come to the rescue of the American economy, after going from the bar chascarrillo to chief epidemiologist. The US Treasury together with the Federal Reserve announced last week a liquidity injection of some 455,000 million euros (500,000 million dollars). For its part, the United States Treasury has created a line of credit of about 9,100 million euros ($ 10 billion) to support short-term corporate debt markets.

Germany: biggest aid since 1945

Germany has put the batteries and, apart from the approved isolation measures, the Executive of Angela Merkel – now in preventive quarantine, has given the green light to a set of measures that will exceed 800,000 million euros and that supposes breaking with the German debt ceiling located at a maximum of 0.35% of GDP. The plan includes a variety of tools to tackle this crisis, such as partial nationalizations to loan guarantees, allocating 100 billion to recapitalize companies, for example. A sort of rescue fund for self-employed workers and SMEs with less than ten employees has also been given the green light for an amount of 50,000 million euros.

All this follows the announcement last week of the mobilization of up to 500,000 million euros in the form of guarantees through the German Development Bank (KfW) for companies. Only 20 billion will be released initially. Also by law, access to public subsidies will be facilitated to support those who suffer cuts in their wages and working hours. In parallel, this first package, already had the expansion of fiscal terms to facilitate deferment of tax payments or returns to taxpayers.

United Kingdom: 363,000 million in guarantees

The Bank of England came out again to the rescue of the always controversial Boris Johnson, a Tory who would not delight the highly orthodox Margaret Thatcher. Specifically, not only did the institution cut rates to 0.1%, but it also extended its debt purchase program to € 700 billion (£ 645 billion).

What unites stimulus package, approved last week by the British government, by an amount of 34.3 billion euros it has been followed by a bigger announcement: £ 330 billion (about € 363 billion), 15% of UK GDP, in guarantees intended to support businesses. A support line of more than £ 5 million (€ 5.5 million) has also been approved for SMEs earning up to £ 1.2 million. In addition to suspend the payment of taxes in certain sectors such as tourism, retail or leisure, for businesses that are worth less than £ 51,000 and are provided with additional guarantees, among other measures. All this, join the promises made in the presentation of the latest Budgets, with the announcement that the British executive would assume the wage costs of those workers who decide to stay at home, for example.

Japan: strong incentives for SMEs

Japan’s economy is on the brink of recession and the Bank of Japan was among the first to promise liquidity injections and asset purchases, although it has not yet materialized. Between this Wednesday and Thursday its leaders are scheduled to meet. In parallel, the Japanese government is already on its second stimulus package. The latter of up 3,588 million euros (about 4,100 million dollars)in spending, aimed mainly at medium and small companies. For its financing, the Shinzo Abe executive must empty the rest of his reserve for the fiscal year (270,000 million yen).


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