Despite being delayed in preventing the nCoV from spreading, European authorities have immediately “corrected” it with a stimulus package of more than 1,500 billion USD.
Europe is currently one of the areas most affected by COVID-19.
The World Health Organization (WHO) on March 13 declared Europe the center of the global epidemic. Numerous countries in this region have closed their borders. The pandemic has killed thousands of people in the area and is severely damaging giants such as Renault, Lufthansa and small shops.
The European stock market has therefore been on a downward trend recently, as investors are concerned about a recession. Today, on 18th March, despite positive information from the US, this market still plummeted. The Stoxx 600 Index dropped by 3.7% at the beginning of the session. Financial stocks led the decline with 5.8%. FTSE (UK), CAC 40 (France) and DAX (Germany) all lost nearly 5%, while the markets of Italy and Spain fell by more than 8%.
Increasing economic losses have caused authorities in Europe to rush to deal with them.
France is by far the country with the strongest reactions, pledging not to let any company collapse. The government will guarantee loans that worth hundreds of billions of dollars, as well as defer taxes, rent, and electricity – water – gas for small businesses. France is also willing to do more and even to nationalize the industries if necessary.
“No French company, regardless of size, must face the risk of collapse,” French President Emmanuel Macron said on French television on Monday.
Analysts at ING on Monday said Macron’s aggressive measures could help narrow the decline of the French economy to only 1% this year. “We believe that these measures will help the French economy rebound quickly after falling into a deep recession because of the COVID-19. In the third quarter, the number of major bankruptcies will be limited and the unemployment rate will be lower than the forecast” they said.
Germany – Europe’s largest economy will support at least 500 billion euros (550 billion USD) in the form of loan guarantees to businesses and is committed to providing unrestricted liquidity to affected companies. It is one of the measures announced by Finance Minister Olaf Scholz last week. It will also make it easier for companies to access loans from the nation’s development bank and defer taxes for struggling businesses.
“Because of the high level of instability in the current situation, the government will not limit the scale of these measures,” the German government said, “If there are any signs of serious economic disruption, the government will use all possible resources to prevent it.”
Spain has announced a bailout package of 200 billion euros (220 billion USD) and said the government will provide all the required capital support to prevent companies from going bankrupt. The country is currently having the second-largest outbreak in Europe with nearly 12,000 cases and more than 530 deaths.
Britain also joined the war yesterday, after being criticized for its slow response of only advising people to avoid crowds. British Finance Minister Rishi Sunak said the government would support the initial loan of 330 billion £ (400 billion USD) to companies. Mortgage loan providers have also agreed to postpone payment for 3 months for those affected by the pandemic.
“We have never faced an economic war like this, but are ready,” Sunak said. “We will do everything we can.”
In total, the aforementioned European countries have pledged to contribute more than $ 1,500 billion. This number is likely to soar.
Economists say decisive action to support businesses, along with measures to ensure workers do not face financial risks if they are fired, can significantly limit the impact of blockade orders. It will also help the economy rebound quickly when the disease is over.
However, these measures need to be implemented quickly. The manufacturing industry across Europe has stopped. Volkswagen yesterday announced it was about to close most of its European factories. Just a day earlier, Fiat Chrysler, PSA Group and Renault all announced the closure of a total of 35 factories.
Countries are also seeking support from the European Union (EU). Margrethe Vestager, a senior official at the European Commission, said she was urging to loosen the antitrust regulations to allow struggling companies to get subsidies of up to 500,000 euros and interest loans with preferential rate.