Fed pumps $2.3 trillion into economy
As the coronavirus pandemic is driving the population into de facto house arrest and pushing the world into recession, a number of major governments have presented unprecedented stimulus packages.
Most emergency measures boast numbers rarely seen in peacetime.
In the United States, the cost of the government’s coronavirus response package is $ 1 trillion. UK announces £ 330bn ($ 400bn) plan, various affected European countries also unveiled multi-billion dollar economic aid packages this week.
But even with such significant funds flowing into the world’s leading economies, experts warn that some populations may be left without help. There are also concerns that aid packages could further widen economic inequality..
President Donald Trump signed the coronavirus aid bill on Wednesday. Its swift passage in the House and Senate represented a rare manifestation of party unity, although Senate Majority Leader Mitch McConnell and other Senate Republicans nevertheless criticized the bill..
But «there are clearly people who are not accounted for» in many articles of the bill, Eliza Gould, senior economist at the Economic Policy Institute in Washington DC told CNN. «There are indeed gaping holes in the paid sick days measures – one of them is that they do not apply to large employers», – she noted.
Several measures were reversed in the Republican-controlled Senate, including provisions on sick leave.
The bill gives many workers two weeks of paid sick leave if they are tested or treated for the coronavirus when diagnosed. Also included in this category are individuals who have been told by a doctor or government official to stay at home due to contact with a sick person or symptoms..
However, according to the revised bill, these payments are capped at $ 511 per day, which is approximately $ 133,000 per year. The original measure required workers to receive full pay, but limited federal reimbursement to employers of this amount..
Workers with coronavirus-affected family members and those whose child schools are closed will still receive up to two-thirds of their wages, although this benefit is capped at $ 200 a day..
The new legislation is not the only economic package expected. The White House also appears to support a plan to dispense paychecks directly, an idea that has some bipartisan support..
The total cost of the first wave of checks will be $ 250 billion, a source familiar with the matter told CNN..
«I don’t think you can go too far», – Gould said of the plan, suggesting first individual payments should be as high as $ 2,000.
«I care about the economic impact, but I also care about people being moved out of their apartments.», Gould told CNN, urging that the approach – if adopted – would be on a monthly basis.
As in other large economies, U.S. service workers are among the most economically vulnerable.
The American Hotel and Lodging Association on Wednesday called on the government to help hotels, saying the industry is facing a crisis, «more serious than anything we’ve seen before».
Even before the pandemic paralyzed Europe, there were signs that Boris Johnson’s government was moving away from the decade of austerity and spending that his Conservative Party is known for..
But the crisis has accelerated this approach, and Johnson announced a £ 330 billion ($ 386 billion) coronavirus package to help businesses stay afloat..
Johnson told the British that he was acting as if he was responsible for «wartime government», announcing a large number of grants, loans and tax holidays for government-backed companies.
But the positive employment rates in the UK are due in part to people on zero-day contracts, freelancers, and it remains to be seen how many people will lose their jobs in closed pubs, clubs and restaurants..
Johnson hasn’t gone as far as French President Emmanuel Macron, helping families and tenants, experts warn that some citizens will be left without government support.
«Currently, statutory sick pay does not cover most of the rent, meaning renters who fall ill risk losing their roof over their heads.», – said Kat Wright of the Acorn union representing tenants.
Three month mortgage leave "misses huge masses of population", she added. The government indicated that further legislation will apply to tenants.
The number of renters has skyrocketed in recent years, especially among millennials. In 2017 (the latest year for which data are available) 4.5 million apartments and houses were rented in the UK, up from 2.8 million in 2007.
«Some landlords will be given a break in their mortgage payments, but their tenants will still be forced to pay them rent if they become infected, Wright said. – This means millions of renters are at risk of homelessness in the midst of one of the biggest public health crises of our time».
A pledge of £ 3.2m ($ 3.7m) was pledged Tuesday to provide housing for homeless people who need to self-isolate. But it’s unclear if this amount will help all UK homeless people..
France on Monday unveiled what is arguably the most ambitious measure in Europe, ditching rents and utility bills for small businesses and guaranteeing € 300bn ($ 324bn) loans.
«No French company, regardless of its size, is at risk of collapse», – said the French government, also urging businesses not to lay off staff.
French Finance Minister Bruno Le Maire also signaled his readiness to intervene in individual situations, telling RTL Radio: «If we see that in some cases some companies have difficulty paying their expenses, they will not have to pay them.».
These statements led politicians in other countries to point to the example of France and demand similar measures.. «Emmanuel Macron has suspended payments on gas, electricity and rent for small businesses in France. UK government to announce further measures to protect workers today», – said UK Labor MP David Lammy.
Analysts at the Dutch bank ING said on Monday that "radical" measures taken by Macron could limit the economic downturn in France to 1% this year.
Spanish Prime Minister Pedro Sanchez said that his government "will not regret the costs" in his economic response to the crisis, promising not to leave any of the citizens.
On Tuesday, he unveiled a € 200bn ($ 216bn) aid package, which he said accounts for about 20% of the country’s GDP and is «largest economic resource mobilization in Spanish history».
Along with the moratorium on mortgage payments to homeowners, some measures have targeted those in insecure situations: self-employed workers have easier access to unemployment benefits, and € 600 billion ($ 648 billion) has been allocated to help vulnerable groups population.
But Spain’s unemployment rate is one of the highest in Europe, making society financially vulnerable..
Home evictions in Spain have increased dramatically since the 2008 financial crisis, leaving many tenants in the country with uncertainty..
«Especially important» keep employment levels stable in Spain, said Angel Talavera, head of European economics at Oxford Economics.
«The labor market is far more sensitive to downturns in economic activity than anywhere else in Europe, which means that a sharp decline in GDP – even if it is temporary – could lead to a large loss of employment.», – Talavera told CNN.
Spain closed bars, restaurants and shops on Monday. Approximately 47 million Spanish residents have been banned from leaving their homes – except for those who go to work, buy food, go to the hospital, or care for an elderly person or child.
«Small businesses, which typically have very small cash buffers, and those in sectors that will be particularly affected by containment measures – hotels, restaurants, tourism – are particularly vulnerable», – said Talavera.