Saudi Arabia calls for G20 summit to help inoculate global economy

The pandemic has upended normal life accross the globe. (Reuters)
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Updated 21 March 2020

Saudi Arabia calls for G20 summit to help inoculate global economy

  • Britain is providing £330bn of government-backed loans to businesses
  • The European Central Bank announced late on Wednesday a surprise €750bn scheme to buy government and corporate bond

LONDON: Governments and central banks are injecting eye-popping sums into markets and applying emergency policy remedies as they try to counter the impact of the coronavirus on the global economy.

The pandemic which has upended all normal life has seen markets crash as world growth faces its biggest crisis since 2008.

AFP surveys responses by major economies as the coronavirus has spread from China to infect the rest of the world, sparking national lockdowns and crippling businesses.

Saudi Arabia, which holds the G20 presidency, has called for an extraordinary summit of the group’s leaders next week. As with all other gatherings now, it would be in “virtual” format.

Europe is now the centre of the Covid-19 outbreak and governments have scrambled to open the spending taps while also closing their borders.

The European Central Bank announced late on Wednesday a surprise €750 billion ($820 billion) scheme to buy government and corporate bonds, boosting funds in the system so as to help contain the economic damage from the virus.

The eurozone bank is reviving crisis-era measures to encourage bank lending to companies, but caused some disquiet last week by keeping its borrowing rates on hold.

Meanwhile, the Bank of England cut Thursday its main interest rate to a record-low 0.1 percent from 0.25 percent, only eight days after having chopped the interest rate from 0.50 percent. It also plans to buy an additional £200 billion ($235 billion) in government and corporate debt.

Berlin has unveiled €550 billion in government-backed loans “for starters” and suspended legal obligations for firms facing acute liquidity problems to file for bankruptcy.

Britain is providing £330 billion of government-backed loans to businesses, while France will guarantee €300 billion in loans to firms and has announced a separate aid package worth 45 billion euros to help businesses and employees cope.

In hardest-hit Italy, the government has promised to deliver a “very strong injection of liquidity” into the financial system to generate €340 billion in cash flows.

Spain plans to guarantee up to €100 billion in corporate loans.

Switzerland’s central bank said on Thursday it would intervene more strongly to stabilise its franc, while Norway is also considering intervention as the krone plunges.

Russia is using its foreign currency reserves to prop up the ruble and is also compensating oil producers directly when oil prices fall below $25 per barrel, as they did on Wednesday.

On Thurs-day, the Senate Majority Leader Mitch McConnell presented a $1 trillion emergency relief package to combat the mounting economic turmoil in the US.

The measure — far surpassing aid during the 2008 financial crisis meltdown — is likely to include direct cash payments to struggling families.

The package is in addition to $100 billion directed at paid sick leave and expanded unemployment benefits signed into law by President Donald Trump on Wednesday.

A bailout for US airlines could also be in the works, Treasury Secretary Steven Mnuchin hinted.

Meanwhile, the Federal Reserve has taken interest rates down to virtually zero.

The US central bank also unveiled a new credit facility to help households and businesses stay afloat, while Trump has shifted his tone after downplaying the outbreak for weeks, now appealing for bipartisan support.

Trump ordered the suspension of evictions and mortgage foreclosures for six weeks as part of the government effort to ease the pain.

On Thursday the Federal Reserve unveiled measures to help money market mutual funds, a popular investment tool, which has seen huge demand to exit as households and small businesses scramble for cash.

Canada on Wednesday announced an aid package of Can$27 billion (US$19 billion) plus more in tax deferrals, and has also cut interest rates.

The International Monetary Fund is making $50 billion available for poorer countries, and has appealed for a “global response” of the kind seen after the 2008 crash.

China, ground zero of the virus 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.

New Zealand on Tuesday raided its “rainy day” fund to release NZ$12.1 billion ($7.3 billion) in stimulus spending.

Last week, Australia unveiled a $11 billion spending plan — equivalent to just under 1 percent of its gross domestic product — to help avert the country’s first recession in 29 years. On Thursday its central bank also cut interest rates to record lows.

Japan, which faces a huge financial hit from the possible postponement of the Tokyo Olympics this summer, is offering more than $15 billion in loan programmes for firms.

South Korea unveiled an unprecedented support programme for small businesses worth 50 trillion won ($39 billion).

Hong Kong’s government is giving a cash handout to every permanent resident, with a recession brought on by months of protests now exacerbated by
the coronavirus.

New emissions blow for VW as German court backs damages claims

Updated 26 May 2020

New emissions blow for VW as German court backs damages claims

  • Scandal has already cost firm more than €30 billion; ruling serves as template for about 60,000 cases

KARLSRUHE, Germany: Volkswagen must pay compensation to owners of vehicles with rigged diesel engines in Germany, a court ruled on Monday, dealing a fresh blow to the automaker almost 5 years after its emissions scandal erupted.

The ruling by Germany’s highest court for civil disputes, which will allow owners to return vehicles for a partial refund of the purchase price, serves as a template for about 60,000 lawsuits that are still pending with lower German courts.

Volkswagen admitted in September 2015 to cheating in emissions tests on diesel engines, a scandal which has already cost it more than €30 billion ($33 billion) in regulatory fines and vehicle refits, mostly in the US.

US authorities banned the affected cars after the cheat software was discovered, triggering claims for compensation.

But in Europe vehicles remained on the roads, leading Volkswagen to argue compensation claims there were without merit. European authorities instead forced the company to update its engine control software and fined it for fraud and administrative lapses.

Volkswagen said on Monday it would work urgently with motorists on an agreement that would see them hold on to the vehicles for a one-off compensation payment.

It did not give an estimate of how much the ruling by the German federal court, the Bundesgerichtshof (BGH), might cost it.

Volkswagen shares were 0.5 percent lower. The BGH’s presiding judge had signaled earlier this month he saw grounds for compensation.

Costs mount

“The verdict by the BGH draws a final line. It creates clarity on the BGH’s views on the underlying questions in the diesel proceedings for most of the 60,000 cases still pending,” Volkswagen said.

A lower court in the city of Koblenz had previously ruled the owner of a VW Sharan minivan had suffered pre-meditated damage, entitling him to reimbursement minus a discount for the mileage the motorist had already
benefited from.

The court at the time said he should be awarded €25,600 for the used-car purchase he made for €31,500 in 2014.

“We have in principle confirmed the verdict from the Koblenz upper regional court,” said BGH presiding federal judge Stephan Seiters.

Volkswagen had petitioned for the ruling to be quashed altogether by the higher court, while the plaintiff had appealed to have the deduction removed.

A Volkswagen spokesman said that outside Germany, more than 100,000 claims for damages were still pending, of which 90,000 cases were in Britain.

The carmaker also said it had paid out a total of €750 million to more than 200,000 separate claimants in Germany who had opted against individual claims and instead joined a class action lawsuit brought by a German consumer group.

The carmaker said last month it would set aside a total of 830 million for that deal.

In a separate court, Volkswagen agreed last week to pay €9 million to end proceedings against its chairman and chief executive, who were accused of withholding market-moving information before the emissions scandal came to light.