Locking down Europe
Written by Javier Maquieira, Associate
Edited by Iain Gibson, Associate Partner
It’s got to a point where I can’t remember the last conversation I had that didn’t involve the coronavirus pandemic. Over the weekend, stories of family and friends back in Spain bracing themselves for an Italy-style lockdown after the Spanish government used emergency powers to impose tight movement restrictions added to those coming from other European countries. At the time of writing, the number of coronavirus deaths in Spain is 292, having more than doubled overnight on Sunday. This makes it the worst hit country in Europe after Italy, where more than 1,800 people with Covid-19 have now died. As police drones overfly Spanish cities and towns to enforce shutdown measures, neighbours all across the country joined together to applaud health workers from their windows and balconies during the weekend. Similar nationwide events took place in Italy and Portugal, creating a truly moving sound of gratitude to those on the coronavirus frontline. Further north, Germany is closing its borders with Austria, Switzerland, France, Luxembourg and Denmark in an attempt to fight the outbreak in the country. Angela Merkel’s government, which had favoured EU coordination before last weekend, is now showing a preference for unilateral action. In a similar vein, the Czech Republic has sealed its borders to contain the spread, introducing what are considered the most draconian restrictions in the country’s 27 years as an independent state. Meanwhile, countries such as France, Ireland, and the Netherlands have implemented partial shutdowns, making it even more difficult to keep up with all the containment measures being taken across Europe. Fearing fragmentation and the inability to lead a coordinated response, the European Union is trying to keep solidarity among member states as high as it can. The European Commission is making available an emergency EU anti-coronavirus package to toughen cross-border health checks and ease the movement of goods and people. Complementing this package, Brussels is set to restrict the export of protection equipment needed for fighting Covid-19 as it seeks to guarantee “the supply of materials, support to hospitals, and financing research to develop a vaccine as soon as possible”. Even when anxiety and fear threaten to overtake us, it’s worth remembering that the time will come when a hug, a stroll, or a concert will mean more to us than ever before. Until then, we should all strive to lead the way out of this by demonstrating community responsibility and a trust in the experts.
Downing Street will hold daily television briefings to update the public on the coronavirus outbreak. From today, the prime minister or a senior minister will give a televised press conference to keep people informed about how to protect themselves. The UK government is also expected to tell Britons over the age of 70 to stay at home for an extended period of time “within coming weeks”, according to the health secretary, Matt Hancock. Cities across the US are leading shutdowns as travel bans tighten. The mayors of New York City and Los Angeles have moved to close public places such as schools, restaurants and bars, nightclubs, cinemas, theatres, and concert venues in an attempt to halt the spread of Covid-19. The states of Illinois, Ohio, Massachusetts, and Washington are also among places to close restaurants to stop dine-in service. US Democratic candidates Joe Biden and Bernie Sanders had their first one-on-one debate on Sunday night. The prime-time encounter took place in a television studio without audience, with both rivals standing far apart and bumping elbows instead of shaking hands. Despite their different visions for the country, Biden and Sanders agreed on the need for a much more aggressive government response to the coronavirus crisis.
Business and economy
The Federal Reserve announced it would cut its target interest rate by a full percentage point near zero, joining forces with other central banks across the world to prevent a severe economic downturn. The rate cut is aimed at avoiding similar financial market disruptions that occurred during the global financial crisis of 2008. Andrew Bailey is taking over as governor of the Bank of England today as the worst economic crisis since 2008 unfolds. Taking up the role from Mark Carney, Bailey will have to make a decision on whether the Bank should cut interest rates further and relaunch its quantitative easing bond-buying programme. Virgin Atlantic’s chairman, Peter Norris, is expected to ask Boris Johnson to provide Britain’s airline industry with emergency government support worth up to £7.5bn. The bailout request is aimed at averting a protracted period of negligible revenue that could see tens of thousands of redundancies in the industry as the Covid-19 crisis escalates. The owner of luxury brand Louis Vuitton, LVMH, will halt perfume production to start making hand sanitiser to protect French people against the coronavirus pandemic. The group announced that the gels would be delivered free of charge to the country’s health authorities with the aim of tackling a nationwide shortage of these anti-viral products.
Columns of note
Writing in the Financial Times, Patrick Jenkins argues that a potential financial crisis will unlikely be averted despite policymakers’ efforts. Although banks are in a far better position than before the global recession of 2008 in terms of market exposure, hedge funds and asset managers, as well as key industries such as oil companies, airlines, and hospitality and healthcare, are big borrowers from lenders. According to Jenkins, it will all come down to how policymakers respond to a potential credit crisis. (£) In City AM, Christian May writes that our ability to overcome the current crisis should never be in doubt. As the UK government tries to figure out how the public will cope with the disruption brought by a potential state of emergency, May is positive that the social fabric will not only hold, but also strengthen. In the meantime, political and business leaders alike will need to be unambiguous, honest, and transparent in their communications.
Source: The Times
The week ahead
As more lockdowns are declared across Europe, the US and Gulf states are planning to ramp up measures to curb the spread of the coronavirus this week. Although many of the scheduled events and meetings for the week ahead have been postponed or cancelled, some have turned to video conferences. G7 leaders are joining one today to discuss their response to the crisis and coordinate research efforts on a vaccine and treatments. EU finance ministers are also meeting today by video conference to talk about the economic impact of Covid-19, as well as measures to restart their economies, following the European Commission’s announcement of emergency spending plans to support sectors of the economy hit by the coronavirus outbreak. In the UK, the government is holding a Cobra meeting this morning to discuss its response to the pandemic as food retailers face panic-buying and struggle to maintain stock. Having already taken emergency action on Sunday, the US Federal Reserve will be the most closely watched on Wednesday, when it announces its policy decision, which could include buying mortgage-backed securities. On Thursday, the Bank of Japan is expected to ease its policy stance, falling in line with its counterparts across the world. In corporate news, Q4 results from Europe’s largest airline, Lufthansa, are expected on Thursday, likely reflecting the global situation faced by airlines as a result of the coronavirus. Other companies reporting this week include Antofagasta, Volkswagen, Zara owner Inditex and JD Wetherspoon.
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