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Greece tells EU its economy is being mauled by the coronavirus pandemic this year – The Globe and Mail

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People sit overlooking Athens following the coronavirus disease (COVID-19) outbreak, Greece, May 3, 2020.

GORAN TOMASEVIC/Reuters

Greece expects its economy to contract between 4.7 per cent and 8.9 per cent this year depending on the length and severity of the coronavirus pandemic, the government’s 2020-21 stability programme submitted to the EU Commission projects.

“The coronavirus outbreak has imposed a burden on the Greek economy as on the rest of the world economy, reversing the initial favourable short-term forecast,” the Finance Ministry said.

The pandemic clouds the outlook for the global economy with a high degree of uncertainty. Demand, supply and liquidity shocks to the world economy set the stage for a deep global recession, worse than that of the 2008 financial crisis, the report said.

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The Greek economy is exposed to “external shocks due to a considerable dependency on tourism and transportation receipts,” it said, noting that the government’s main goals now were to bridge the growth gap caused by the health crisis and attract investment.

The baseline projection for a 4.7-per-cent contraction takes into account the impact of policy response measures and assumes that the public health crisis fades in the second half of 2020.

But under an alternative set of more adverse assumptions, the programme projects a significantly deeper contraction of up to 8.9 per cent due to a steeper drop of exports and broader negative spillover effects.

Either way, the primary budget balance, which excludes debt servicing outlays, will be in the red, according to the ministry projections – – with a deficit of 1.9 per cent under the baseline assumptions and a 2.8-per-cent hole under the adverse scenario.

Greece, which emerged from its latest international bailout in August, 2018, had managed to outperform its primary budget target for five consecutive years and deliver primary surpluses of more than 3.5 per cent of economic output.

Finance Minister Christos Staikouras said in March that Athens would get more fiscal flexibility to tackle the coronavirus crisis and will not be constrained by a commitment to the European Union to deliver previously agreed budget savings.

Based on stability programme forecasts, public debt is seen rising to 337-billion euros or 188.8 per cent of gross domestic product at the end this year from 331-billion euros or 176.6 per cent of GDP in 2019.

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Coronavirus 'a devastating blow for world economy' – BBC News

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The coronavirus pandemic is a “devastating blow” for the world economy, according to World Bank President David Malpass.

Mr Malpass warned that billions of people would have their livelihoods affected by the pandemic.

He said that the economic fallout could last for a decade.

In May, Mr Malpass warned that 60 million people could be pushed into “extreme poverty” by the effects of coronavirus.

The World Bank defines “extreme poverty” as living on less than $1.90 (£1.55) per person per day.

However, in an interview on Friday Mr Malpass said that more than 60 million people could find themselves with less than £1 per day to live on.

Mr Malpass told BBC Radio 4’s The World This Weekend: “It [coronavirus] has been a devastating blow for the economy.

“The combination of the pandemic itself, and the shutdowns, has meant billions of people whose livelihoods have been disrupted. That’s concerning.

“Both the direct consequences, meaning lost income, but also then the health consequences, the social consequences, are really harsh.”

Mr Malpass warned it’s been those who can least afford it who’ve suffered the most.

“We can see that with the stock market in the US being relatively high, and yet people in the poor countries being not only unemployed, but unable to get any work even in the informal sector. And that’s going to have consequences for a decade.”

The World Bank, along with its counterparts, has been providing support to the worst affected countries, but says much more is needed.

It is calling on commercial lenders such as banks and pension funds to offer debt relief to poor countries.

He would also like them to make the terms of their loans clearer, so other investors are more confident about putting money into those economies.

Targeted government support and measures to shore up the private sector are also vital to rebuild economies, the World Bank argues.

Investment and support would create jobs in areas like manufacturing, to replace those in the worst affected sectors, such as tourism, which may have been permanently lost.

‘Tensions and inequality’

Mr Malpass admits the damage to global trade, and inclinations to bring supply chains closer to home or erect trade barriers, are a challenge.

“When trade is reduced, that creates its own set of tensions and inequality… I’m sure [the global economy] will be interconnected in the future, maybe less than it was pre-COVID.”

But ultimately, Mr Malpass said the “catastrophe” could be overcome, and that people were “flexible, they’re resilient” .

“I think it’s possible to find paths, it’s hard work for countries and governments to do that.

“But we can encourage that effort… I’m an optimist, over the long run, that human nature is strong, and innovation is real. The world is moving fast and connectivity… has never been higher. And so that gives hope for the future.”

However, he admits the challenge is getting the right plans in place at the right time – and in the meantime, the pain could be considerable.

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Guardians of the World Economy Stagger From Rescue to Recovery – Yahoo Canada Finance

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Guardians of the World Economy Stagger From Rescue to Recovery

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(Bloomberg) — The world’s governments and central banks are shifting from rescue to recovery mode as the deepest slump since the Great Depression shows signs of bottoming out.

After rolling out trillions of dollars worth of measures to prevent their economies and markets from collapsing, they are now doubling down with even more spending to backstop a recovery as coronavirus lockdowns ease. In what counts for good news these days, Bloomberg Economics’ global GDP growth tracker showed economies contracted at an annualized rate of 2.3% in May, less than the 4.8% slump in April.

“Policy makers are moving from triage to recovery,” said Deutsche Bank Securities Chief Economist Torsten Slok. “They are realizing that more fiscal support will be needed to households and small businesses to prevent this liquidity crisis from turning into a solvency crisis.”

The new wave of stimulus has both governments and central banks moving in sync to continue flooding lenders, markets and companies with cheap credit at an unprecedented pace.

The European Central Bank last week expanded its asset purchases by 600 billion euros ($677 billion) to 1.35 trillion euros, and extended them until at least the end of June 2021. And Germany’s government agreed another 130 billion-euro fiscal stimulus push and said it will back a proposed new 750 billion-euro European Union recovery fund.

“Action had to be taken,” ECB President Christine Lagarde said in a press conference.

It’s a similar story in Asia.

Japan is planning another $1.1 trillion worth of spending in its biggest splurge yet and the central bank in May called an emergency meeting to roll out 30 trillion yen ($274 billion) of loan support for small businesses.

China last week unveiled another 3.6 trillion yuan ($508 billion) in spending and South Korea’s 76 trillion won ($63 billion) ‘New Deal’ fiscal package is its largest to date.

In the U.S., lawmakers continue to debate extra fiscal stimulus and the Federal Reserve, which meets on June 10, has just launched a new Main Street Lending Program, the latest in trillions of support it has already poured into the economy and markets.

While the Fed is unlikely to signal any moves when its officials gather this week, many economists expect it to harden its commitment to easy monetary policy later in the year and perhaps even start pursing a Japan-style campaign to control long-term borrowing rates.

The latest U.S. jobs numbers give some hope that the stimulus unleashed so far is beginning to kick in. A record 2.5 million workers were added by employers during May while unemployment declined to 13.3%, wrong footing economists who had forecast widespread job losses.

Read more: Economists Have Biggest Miss Ever in U.S. Jobs-Report Shocker

To be sure, there’s far from consensus that the latest wave of support will be enough to get growth back to where it was at the start of the year. Some of the steps being taken are merely to replace existing policies as they start to expire.

“It seems clear already approved packages are perceived to be not enough,” said Alicia Garcia Herrero, chief Asia-Pacific economist at Natixis SA.

There are other concerns that monetary policy can only do so much to revive growth before it loses its potency.

“How does the Fed actually get money to millions and millions of households and small businesses, that is difficult to do operationally,” former New York Federal Reserve Bank President William Dudley told Bloomberg Television.

“It’s much easier to intervene in the capital markets where the Fed can rely on counterparties, primary dealers and others,” Dudley said. “It is much more difficult to lend one by one to millions of different entities.”

Another risk is a return to austerity, even if it seems unlikely now. JPMorgan recently predicted a fiscal thrust of 3.3% of GDP this year and 1.5% drag next year.

U.S. senators have put the brakes on a $3 trillion fiscal package that was approved by lower house lawmakers. China’s government has ruled out a return to the kind of large scale stimulus it rolled out after the global financial crisis, preferring to keep a lid on rising debt.

Still, because the crisis meant economies were forced into shutdown, much of the emergency response so far has been less about driving growth and more about avoiding total collapse. It’s that dynamic which is leaving governments with little option but to borrow harder.

“We shouldn’t look at the positive immediate growth impact of the opening up process as being the rate of growth that may last,” said David Mann, chief economist for Standard Chartered Plc.

Creating jobs will be mission critical to cementing any upswing. That will need support for firms to retrain employees, incentives to hire older workers and for governments to continue with wage subsidies. More than one in six people have stopped working since the onset of the crisis, according to the International Labour Organization, which in April estimated more than 1 billion workers were at high risk of a pay cut or losing their job.

“A faster job market recovery will speed up the economic healing and reduce the risk from widening income inequality and social stress,” said Chua Hak Bin, senior economist at Maybank Kim Eng Research Pte.

Ultimately, the rescue of economies will go well beyond quantitative solutions and into the realm of story telling too, as policy makers will need to inject confidence back into wary consumers and executives, said Stephen Jen, who runs hedge fund and advisory firm Eurizon SLJ Capital in London.

“Human psychology is the same and is now as important as the mechanics of delivering the fiscal stimuli themselves,” he said.

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Guardians of the world economy stagger from rescue to recovery – BNNBloomberg.ca

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The world’s governments and central banks are shifting from rescue to recovery mode as the deepest slump since the Great Depression shows signs of bottoming out.

After rolling out trillions of dollars worth of measures to prevent their economies and markets from collapsing, they are now doubling down with even more spending to backstop a recovery as coronavirus lockdowns ease. In what counts for good news these days, Bloomberg Economics’ global GDP growth tracker showed economies contracted at an annualized rate of 2.3 per cent in May, less than the 4.8-per-cent slump in April.

“Policy-makers are moving from triage to recovery,” said Deutsche Bank Securities Chief Economist Torsten Slok. “They are realizing that more fiscal support will be needed to households and small businesses to prevent this liquidity crisis from turning into a solvency crisis.”

The new wave of stimulus has both governments and central banks moving in sync to continue flooding lenders, markets and companies with cheap credit at an unprecedented pace.

The European Central Bank last week expanded its asset purchases by 600 billion euros (US$677 billion) to 1.35 trillion euros, and extended them until at least the end of June 2021. And Germany’s government agreed another 130 billion-euro fiscal stimulus push and said it will back a proposed new 750 billion-euro European Union recovery fund.

“Action had to be taken,” ECB President Christine Lagarde said in a press conference.

It’s a similar story in Asia.

Japan is planning another US$1.1 trillion worth of spending in its biggest splurge yet and the central bank in May called an emergency meeting to roll out 30 trillion yen (US$274 billion) of loan support for small businesses.

China last week unveiled another 3.6 trillion yuan (US$508 billion) in spending and South Korea’s 76 trillion won (US$63 billion) ‘New Deal’ fiscal package is its largest to date.

In the U.S., lawmakers continue to debate extra fiscal stimulus and the Federal Reserve, which meets on June 10, has just launched a new Main Street Lending Program, the latest in trillions of support it has already poured into the economy and markets.

While the Fed is unlikely to signal any moves when its officials gather this week, many economists expect it to harden its commitment to easy monetary policy later in the year and perhaps even start pursing a Japan-style campaign to control long-term borrowing rates.

The latest U.S. jobs numbers give some hope that the stimulus unleashed so far is beginning to kick in. A record 2.5 million workers were added by employers during May while unemployment declined to 13.3 per cent, wrong footing economists who had forecast widespread job losses.

To be sure, there’s far from consensus that the latest wave of support will be enough to get growth back to where it was at the start of the year. Some of the steps being taken are merely to replace existing policies as they start to expire.

“It seems clear already approved packages are perceived to be not enough,” said Alicia Garcia Herrero, chief Asia-Pacific economist at Natixis SA.

There are other concerns that monetary policy can only do so much to revive growth before it loses its potency.

“How does the Fed actually get money to millions and millions of households and small businesses, that is difficult to do operationally,” former New York Federal Reserve Bank President William Dudley told Bloomberg Television.

“It’s much easier to intervene in the capital markets where the Fed can rely on counterparties, primary dealers and others,” Dudley said. “It is much more difficult to lend one by one to millions of different entities.”

Another risk is a return to austerity, even if it seems unlikely now. JPMorgan recently predicted a fiscal thrust of 3.3 per cent of GDP this year and 1.5 per cent drag next year.

U.S. senators have put the brakes on a US$3-trillion fiscal package that was approved by lower house lawmakers. China’s government has ruled out a return to the kind of large scale stimulus it rolled out after the global financial crisis, preferring to keep a lid on rising debt.

Still, because the crisis meant economies were forced into shutdown, much of the emergency response so far has been less about driving growth and more about avoiding total collapse. It’s that dynamic which is leaving governments with little option but to borrow harder.

“We shouldn’t look at the positive immediate growth impact of the opening up process as being the rate of growth that may last,” said David Mann, chief economist for Standard Chartered Plc.

Creating jobs will be mission critical to cementing any upswing. That will need support for firms to retrain employees, incentives to hire older workers and for governments to continue with wage subsidies. More than one in six people have stopped working since the onset of the crisis, according to the International Labour Organization, which in April estimated more than 1 billion workers were at high risk of a pay cut or losing their job.

“A faster job market recovery will speed up the economic healing and reduce the risk from widening income inequality and social stress,” said Chua Hak Bin, senior economist at Maybank Kim Eng Research Pte.

Ultimately, the rescue of economies will go well beyond quantitative solutions and into the realm of story telling too, as policy makers will need to inject confidence back into wary consumers and executives, said Stephen Jen, who runs hedge fund and advisory firm Eurizon SLJ Capital in London.

“Human psychology is the same and is now as important as the mechanics of delivering the fiscal stimuli themselves,” he said.

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