Record economic slumps hit Europe in face of resurgent virus

A woman walks past a closed store in Madrid. In Spain, the coronavirus has pushed small businesses to the brink of collapse, a story repeated across Europe six months after a global emergency was declared over the pandemic. (AFP)
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Updated 01 August 2020

Record economic slumps hit Europe in face of resurgent virus

  • Britain imposes new lockdown rules on eve of Eid-Al-Adha festival, while Spain, France, Italy declare historic losses

PARIS: Nation after nation across Europe on Friday unveiled the extent of historic economic devastation as resurgent coronavirus cases forced agonizing new trade-offs between lives and financial health.
Six months after the World Health Organization (WHO) declared a global emergency, the novel coronavirus has infected more than 17 million people and wreaked global economic mayhem.
France’s economy contracted by a record 13.8 percent in the second quarter, Spain went into recession after its gross domestic product (GDP) slumped 18.5 percent, Portugal’s economy contracted by 14.1 percent, and Italy’s GDP plunged 12.4 percent.
Europe as a whole was hammered by its sharpest recorded contraction in the second quarter, with GDP down 12.1 percent in the euro zone and 11.9 percent across the bloc.
“It is a shocking drop, but completely understandable as the economy was shut for a considerable period during the quarter,” said Bert Colijn, senior economist at ING Bank.
Airline conglomerate IAG, the owner of British Airways, on Friday posted a first-half net loss of €3.8 billion ($4.5 billion), UK bank NatWest slid into the red, while Dutch airline KLM and truck makers Scania said they were each shedding 5,000 jobs.
Britain on Friday enforced new lockdown rules in Manchester and nearby parts of northern England in an announcement made on the eve of the Muslim Eid-Al-Adha festival.
Under the measures, people from different households in the affected areas are banned from meeting indoors. They apply to some 4 million people across Greater Manchester and parts of the counties of Lancashire and Yorkshire — areas that have a sizeable Muslim population.
“We take this action with a heavy heart, but we can see increasing rates of COVID across Europe and are determined to do whatever is necessary to keep people safe,” British Health Secretary Matt Hancock said on Twitter.
The sacred Hajj pilgrimage in Saudi Arabia has been held with about 10,000 Muslim faithful allowed, instead of the roughly 2.5 million pilgrims that attended last year.
Pilgrims were brought in small batches into Makkah’s Grand Mosque, walking along paths marked on the floor, in sharp contrast to the normal sea of humanity that swirls inside its walls.

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Europe as a whole was hammered by its sharpest recorded contraction in the second quarter, with GDP down 12.1 percent in the euro zone.

The UN health agency’s emergency committee was to meet for a fourth time on Friday to assess the raging pandemic and its status as a public health emergency of international concern (PHEIC) — WHO’s highest level of alarm.
World Health Organization chief Tedros Adhanom Ghebreyesus has defended the agency’s response, saying it had declared a top-level public health emergency on Jan. 30, when there were fewer than 100 cases and no deaths outside China, where the virus first emerged.
“Spikes of cases in some countries are being driven in part by younger people letting down their guard during the northern hemisphere summer,” said Tedros.
Amid the race to find a medical solution, Japan has signed a deal to secure 120 million doses of a potential coronavirus vaccine, said German pharmaceutical group BioNTech, which is developing the drug with US pharma giant Pfizer.
Financial details of the deal were not disclosed, with BioNTech saying the terms were based on the timing of the delivery and volume of doses.
But an agreement announced recently between the labs and the US put the price of 100 million doses of the potential vaccine at almost $2 billion.
The US — the world’s hardest-hit nation and its biggest economy — posted a second-quarter loss of 9.5 percent compared with the same period a year ago, the worst figure on record. If that trajectory carried through the entire year, its economy would collapse by nearly a third (32.9 percent), the data showed.
Historic contractions have been additionally recorded in Germany (10.1 percent), Belgium (12.2 percent), Austria (10.7 percent) and Mexico (17 percent).
Global daily cases are now approaching 300,000, with the curve showing no sign of flattening — it took just 100 hours for 1 million new cases to be recorded.
Vietnam recorded its first coronavirus death on Friday as the pandemic rebounds in a country that had previously been praised for stubbing out the contagion.
Hong Kong said it would delay local elections planned for September because of a virus surge.
In Japan, Tokyo’s governor called for restaurants, bars and karaoke parlours to shut earlier as the capital reported a record number of new infections.
Sweden, whose controversial softer approach to curbing coronavirus has received worldwide attention, said it would encourage people to keep working from home into next year where possible, as the country passed 80,000 recorded cases.


Oil giants’ production cuts come to 1m bpd as they post massive write-downs

Updated 10 August 2020

Oil giants’ production cuts come to 1m bpd as they post massive write-downs

  • Crude output worldwide dropped sharply after the market crashed in April

LONDON: The world’s five largest oil companies collectively cut the value of their assets by nearly $50 billion in the second quarter, and slashed production rates as the coronavirus pandemic caused a drastic fall in fuel prices and demand.

The dramatic reductions in asset valuations and decline in output show the depth of the pain in the second quarter. Fuel demand at one point was down by more than 30 percent worldwide.

Several executives said they took massive write-downs because they expect demand to remain impaired for several more quarters as people travel less and use less fuel due to the ongoing global pandemic.

Of those five companies, only Exxon Mobil did not book sizeable impairments. But an ongoing reevaluation of its plans could lead to a “significant portion” of its assets being impaired, it reported, and signal the elimination of 20 percent or 4.4 billion barrels of its oil and gas reserves.

By contrast, BP took a $17 billion hit. It said it plans to recenter its spending in coming years around renewables and less on oil and natural gas.

Weak demand means oil producers must revisit business plans, said Lee Maginniss, managing director at consultants Alarez & Marsal. He said the goal should be to pump only what generates cash in excess of overhead costs.

“It’s low-cost production mode through the end of 2021 for sure, and to 2022 to the extent there are new development plans being contemplated,” Maginniss said.

London-based BP has previously said it plans to cut its overall output by roughly 1 million barrels of oil equivalent (BOEPD) by the end of 2030 from its current 3.6 million BOEPD.

Of the five, Exxon is the largest producer, with daily output of 3.64 million BOEPD, but its production dropped 408,000 BOEPD between the first and second quarters. The five majors, which include Chevron Corp, Royal Dutch Shell and Total SA, also cut capital expenditures by a combined $25 billion between the quarters.

Crude output worldwide dropped sharply after the market crashed in April. The Organization of the Petroleum Exporting Countries agreed to cut output by nearly 10 million barrels a day to balance out supply and demand in the market.