European Countries’ Plans for Saving Economies in Face of COVID-19

European+Countries%27+Plans+for+Saving+Economies+in+Face+of+COVID-19

Shirley Huang, Staff Writer

Due to the coronavirus pandemic, many businesses are being forced to shut down, leaving their employees with neither jobs nor pay. Though the U.S. has yet to announce major stimulus measures, many European governments have already outlined plans to save the global economy from plunging into recession.

France has been the boldest so far, with its President, Emmanuel Macron, announcing in a televised national address: “No French company, whatever its size, will be exposed to the risk of collapse.” 

In other words, the French government is promising that no company will face ruin as a consequence of the pandemic. To ensure that no citizen be financially strained, the government is mobilizing hundreds of billions in loan guarantees as well as delaying tax payments. Rent for smaller firms has been suspended and if necessary, the French government is prepared to go even further by nationalizing industries.

Analysts at Dutch bank ING predict that if the French state goes through with these measures, it would limit the economic contraction, or decline in national output, in France to 1% this year. 

“We believe that these measures will help the French economy to rebound more quickly after the deep recession caused by Covid-19 and reach the third quarter with a limited number of large bankruptcies and hence an unemployment rate far below what a recession of that magnitude could have caused,” they said in a research note.

As the eurozone’s largest economy, Germany has taken a similar approach by delaying tax payments for struggling businesses, granting $550 billion worth of federally guaranteed loans, and providing unlimited credit to companies hurt by the public health crisis.

The country had to act quickly as entire manufacturing sectors were coming to a stop all throughout Europe, including Germany’s Volkswagen which has already announced preparations to close most of its manufacturing plants on the continent. 

“This is the bazooka with which we are doing what is necessary now. We’re putting all our weapons on the table and showing that we are stronger than the problem we might face in economic terms,” said finance minister Olaf Scholz during a news conference.

In Spain, the prime minister issued a $220 billion rescue package and ensured that the government would provide all capital necessary to prevent companies from going bankrupt.

Lastly, the United Kingdom’s finance minister Rishi Sunak announced on Tuesday that the government plans to back an initial $400 billion in loans as well as delayed mortgage payments for three months. Initially, the UK had been criticized for its delayed response, having only warned citizens to avoid large gatherings the day before.

All this said, these four major European governments have committed $1.5 trillion to support their economies–and the amount could go much higher. 

Economists believe that by supporting businesses and assuring that workers won’t face financial ruin, it will dramatically limit the trauma of the current public health emergency and allow for economies to quickly bounce back once the crisis is over.

 

Photo courtesy of HENRYHERALD.COM