Finance Chiefs Struggle to Inoculate World Economy from Virus

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Governments and central banks are throwing policy remedies against the coronavirus pandemic, but markets remain in freefall as the world economy faces its biggest crisis since 2008.

On Thursday, the European Central Bank joined the immunization drive, announcing extra steps to encourage bank lending to beleaguered companies.

But the eurozone's custodian caused surprise by leaving its key interest rates unchanged, unlike central banks in the United States, Britain and elsewhere.

At any rate, emergency rate cuts over the past fortnight have done little to stem panic on financial markets. Nor have promises by governments to open the spending taps.

"To be blunt, no fiscal or monetary easing could have the same impact as a vaccine against COVID-19," ING economists said in a note.

AFP surveys policy responses by major economies as the coronavirus has spread from China to infect the rest of the world, shutting down businesses, halting travel and paralyzing supply chains: 

- NORTH AMERICA - 

U.S. lawmakers last week passed an $8.3 billion spending bill to combat the coronavirus, but President Donald Trump's election-year demands for specific steps such as a cut to income taxes have met short shrift in Congress.

The Federal Reserve has slashed its key interest rate by a half point to a range of 1.0-1.25 percent -- its first inter-meeting cut since late 2008.

On Thursday, the Fed's New York branch announced a massive increase to its cash injections into American financial markets, offering $1.5 trillion in short-term funding over two days.

Canada's central bank also cut its key lending rate by 50 basis points.

The International Monetary Fund is making $50 billion in aid available for poorer countries, warning that global growth could now slip below last year's 2.9 percent.

Sanctions-hit Iran said on Thursday that it was seeking financial assistance from the IMF for the first time since 1962, to help it combat the disease.

The epidemic "is no longer a regional issue, it is a global problem calling for global response", IMF chief Kristalina Georgieva said last week.

But unlike in 2008, businesses are waiting in vain for a coordinated response by governments, and Trump has provoked fury in Europe by banning all travel from the continent.

- EUROPE - 

While leaving borrowing rates in place, the ECB agreed a new round of cheap loans to eurozone banks, and will channel an extra 120 billion euros ($135 billion) of "quantitative easing" asset purchases this year.

That followed the European Union's adoption of an investment fund worth up to 25 billion euros to support healthcare, jobs and small businesses.

Italy is the worst-hit country in the EU and has gone into national lockdown. 

Rome is vowing to spend up to 25 billion euros on its own to fight the epidemic, at the risk of busting further beyond EU limits on debt and deficits. 

France and others want Brussels to relax its strictures. Fiscal hardliner Germany says it is open to more spending.

Britain, now outside the EU, on Wednesday outlined fiscal stimulus worth £30 billion ($39 billion) while the Bank of England slashed interest rates to a record-low 0.25 percent.

- ASIA - 

China, ground zero of the outbreak with more than 3,000 deaths, has cut interest rates and vowed a range of measures including tax cuts and more fiscal transfers from Beijing to virus-hit regions.

On Thursday, Australia unveiled a massive US$11 billion spending plan -- equivalent to just under one percent of GDP -- to help avert its first recession in 29 years.

Hong Kong's government is giving a handout of HK$10,000 (US$1,280) to every permanent resident, battling to overcome a recession brought on by months of popular protests and now exacerbated by the coronavirus outbreak.

Japan on Tuesday announced a second emergency package to offset the impact, including $15 billion in loan programs to support small businesses.

The Bank of Japan, which meets next week, has assured investors it will "strive to provide ample liquidity and ensure stability in financial markets."

Indonesia, Singapore, South Korea and Thailand are also looking at plowing billions of dollars in extra stimulus into their export-driven economies. 

According to S&P Global Ratings, the epidemic could wipe more than $200 billion off Asia-Pacific economies this year.