Western countries embark on trillion-dollar virus fightback
Western governments have mounted a multi-trillion-dollar fightback to limit the economic fallout from the coronavirus pandemic with Donald Trump’s White House proposing to send a cheque to every American.
The sudden White House shift to more aggressive economic interventions to the outbreak came alongside attempts by Britain, France, Germany and Spain to use their balance sheets to prop up business activity and protect household incomes.
World leaders have been forced to tear up the traditional economic playbook in response to the historic jolt to the global economy.
A senior US official said a scheme to directly pay individual Americans, publicly unveiled on Tuesday by Treasury secretary Steven Mnuchin, would be part of a broader stimulus package proposed to Congress totalling as much as $1.2bn.
Europe’s largest economies announced more concrete plans, with Britain unveiling a £330bn package of emergency loan guarantees to business and £20bn of fiscal support. Rishi Sunak, the UK chancellor, said: “This is not a time for ideology or orthodoxy, this is a time to be bold . . . I’ll do whatever it takes.”
Pedro Sánchez, Spain’s prime minister, also triggered the “biggest mobilisation of resources in Spain’s democratic history” to fight the economic crisis, which included €100bn of state loan guarantees.
“I will not hesitate to use all the means available to me,” said Bruno Le Maire, the French finance minister.
Paris will also guarantee €300bn of bank loans to businesses to ensure they do not collapse for want of liquidity. Eurozone members collectively offered €1tn in such national guarantees.
In Washington, Mr Trump’s aides initially dismissed cash payments to Americans as “helicopter money from the sky”. But the president told reporters he had been persuaded of the need for an immediate infusion of money for struggling families.
“It’s going to be big, and it’s going to be bold,” he said at a White House briefing on Tuesday. He said there was “enthusiasm” on Capitol Hill for the measures, and the price tag rose over the course of the day. A senior US official initially said the White House was looking at a $850bn plan, but that total rose to $1.2tn later on Tuesday.
Financial markets welcomed the sign of collective fiscal action. Wall Street’s benchmark S&P 500 was up as much as 6 per cent in late afternoon trading, a significant rebound following Monday’s historic sell-off.
Restrictions to limit the spread of coronavirus have closed borders and forced the closure of schools, bars, restaurants and manufacturing plants across five continents. Demand has collapsed for airlines and hospitality sectors, while large manufacturers have begun to suspend production.
The main trade body for the global airline industry called for up to $200bn in emergency support to weather the economic storm and prevent mass-bankruptcy within two months. Marriott International, the hotel group, announced that tens of thousands of its staff would be put on unpaid leave.
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Volkswagen, Daimler, Ford and Nissan all halted work at plants on Tuesday in a second wave of factory closures in Europe that almost brought Europe’s once buoyant car industry to a standstill. Unions in the US have called for a two-week shutdown of all Ford, General Motors and Fiat Chrysler plants.
Financial markets were also cheered by the US Federal Reserve’s second straight day of aggressive action, entering the market for short-term company debt known as commercial paper and providing an extra $500bn to support the overnight lending market.
Additional reporting by Daniel Dombey in Madrid