Friday, March 29, 2024
 
 

Gulf nations have been quick to prevent economic downturn and Europe must do the same

EPA-EFE//MAHMOUD KHALED
The laptop screen of Mohammed El Okily, a designer working from his home in Sharjah, the United Arab Emirates, March 26, 2020. Most companies, including the Emirates' federal government, are opting for teleworking to limit the spread of the COVID-19 coronavirus.

- Advertisement -

From the outset of the novel coronavirus outbreak, it became clear that its repercussions would go far beyond public health. As countries have scrambled to hinder the spread of COVID-19, the restrictions implemented have had a devastating effect on global markets.
 The economic impact can be observed at all levels from individual retailers that have taken the unprecedented move of indefinitely shutting their doors, to stock market and oil price plunges. 
 Yet with all of these drastic consequences, many governments are still hesitant to orchestrate an economic response. 
Europe, in particular, has been slow to implement any economic stimulus packages. Many of Europe’s leaders made it clear from the outset that this was not a priority, resulting in a deadlock of sorts on how to react to the economic crisis. Many policymakers have, in fact, demanded swift action. Pascal Canfin for instance, a French MEP and ally of President Emmanuel Macron, called for a “European stimulus package”, a continent-wide recovery fund that would be used to sustain corporations and smaller businesses. Canfin urged his colleagues to make this a priority at the EU leaders’ summit at the end of March.
Similarly, Christine Lagarde, president of the European Central Bank, called for an emergency fund of €27 billion to deal with the economic fallout. Mario Centeno, the head a group known as the ‘Eurogroup’ said that his members would come up with “a very large policy response” to address the pandemic and that it would likely require more than the funds already pledged by Central Bank president, Lagarde. But more senior EU officials think it’s premature to discuss this kind of stimulus at all. The European commission’s vice-president in charge of the economy, Valdis Dombrovskis for instance, responded recently to reporters with the following: “In current circumstances, I wouldn’t be talking so much about fiscal stimulus, rather about crisis response.”
 What has resulted from this lack of decisiveness is a series of lacklustre remedies. Instead of direct assistance, governments have focused on a mixture of tax moratoriums, payment extensions on social charges, loan guarantees and wage subsidies for workers who cannot work or move to part-time roles. By far the most daring moe from a European nation to date came from Sweden when policymakers in Stockholm allowed businesses to defer tax payments for up to a year at a cost of more than €27.5 billion to the nation’s treasury, or 6% of gross domestic product. All of these steps have so far failed to make a substantial difference or bring confidence back to markets. As one London based analyst interviewed by the New York Times put it, European dysfunction in responding to the crisis is “a major source of concern, it’s almost bordering on policy negligence.” 
At this stage in the game, the time for deliberation has passed.
The countries in Europe hit the hardest by the coronavirus, such as France and Italy are already teetering economically. Even Germany with its robust economy and a relatively low rate of COVID-19 spread has suffered due to a crash in demand for its exports. 
In order to have any hope of mitigating the economic lapse, European nations must orchestrate a continental effort to keep businesses afloat. Here, the eurozone can look to other governments that have already taken strong measures to maintain their economies’ viability.
The UAE, for instance, recently unveiled a $27 billion stimulus package that will go mostly toward supporting the Emirates’ vital industries such as banking and tourism. Authorities have also taken major steps to ease the burden on owners of small to medium enterprises (SMEs) such as cancelling customs and other licensing fees. Direct support to the small business sector will come from a $1.3 billion fund and an additional $800 million sum to provide credit guarantees to support SME operations. Both of these packages have been approved by the Abu Dhabi Executive Council.
Another instance of a comprehensive support plan was seen in Australia where the Treasury in coordination with the Prime Minister’s office, has begun a $17.6 billion economic stimulus package program. According to official reports, as many as 6.5 million workers and 3.5 million businesses would be supported by the effort. First to be activated will be a direct $750 payment (tax-free) to low-income earners as well as pensioners, veterans, and others. Additionally, a “Boost Cash Flow” fund of $6.7 billion has been set up to deliver payments of up to $25,000 to SME’s, with another $1.3 billion set aside for business owners to continue paying their employees.
Other stimulus plans have been activated throughout the Middle East and Asia, with Saudi Arabia’s central bank beginning to disperse $13.3 billion to support private businesses, and Japan announced a $4 billion aid program. The largest government-funded plan has come from Washington, where the federal authorities are on the cusp of approving a $1 trillion bill to help American workers and businesses get through the economic impact of the coronavirus.
Can European leaders transcend their longstanding bickering and form a plan for the good of their constituents? There is room for optimism.
As the crisis began to loom near, many European capitals pledged billions of euros for a recovery effort in what was a rare sign of unity. Since then, however, no unified plan has come about. Europe’s heads of state can effectively combat the economic effects of COVID-19 if only swift action is taken. 

- Advertisement -

Subscribe to our newsletter

Latest

U.S. condemns latest PRC actions in South China Sea as dangerous

Coming just days after U.S. Secretary of State Antony...

With Sweden now a NATO member, what’s next?

Sweden completed the necessary diplomatic formalities on March 7,...

Inaugural B5+1 Forum launched to boost regional trade and investment

On March 13-15, government policymakers, business leaders, experts, and...

Don't miss

U.S. condemns latest PRC actions in South China Sea as dangerous

Coming just days after U.S. Secretary of State Antony...

With Sweden now a NATO member, what’s next?

Sweden completed the necessary diplomatic formalities on March 7,...

Inaugural B5+1 Forum launched to boost regional trade and investment

On March 13-15, government policymakers, business leaders, experts, and...

U.S. zeroes in on Houthi revenue sources

The U.S. Government made several announcements this month regarding...

U.S. condemns latest PRC actions in South China Sea as dangerous

Coming just days after U.S. Secretary of State Antony Blinken visited Manila (March 19), Washington released on March 23 a strongly worded statement of...

With Sweden now a NATO member, what’s next?

Sweden completed the necessary diplomatic formalities on March 7, depositing its instrument of accession with the U.S. State Department in Washington, which manages the...

Inaugural B5+1 Forum launched to boost regional trade and investment

On March 13-15, government policymakers, business leaders, experts, and investors from C5+1 countries inaugurated the first-ever Business 5+1 (B5+1) Forum which was held in...

U.S. zeroes in on Houthi revenue sources

The U.S. Government made several announcements this month regarding new sanctions on Houthi revenue sources, building on steps taken in coordination with the U.K....

Can Innovation Diplomacy End the Climate Gamble?

With today’s global challenges urging equally global responses, an overlooked subset of diplomacy emerges as potentially pivotal: innovation diplomacy, a discipline related to the...

U.S. joins International Coalition for the Return of Ukrainian Children

On March 7, the office of the spokesperson at the U.S. Department of State issued a media note, clearly meant to be circulated in...

Eyeing competitors, OPEC+ countries will keep cutting oil production

Several OPEC+ countries are extending additional voluntary cuts of 2.2 million barrels per day, aimed at supporting what they are labeling "the stability and...

Intellexa Commercial Spyware Consortium sanctioned

The U.S. Government announced on March 5 a new set of sanctions on the members of the Intellexa Commercial Spyware Consortium based across Europe....