18 Jun
EACC

For a united, resilient and sovereign Europe

HRVP Josep Borrell and the Commissioner for the Internal Market Thierry Breton publish an article in several European media on the EU’s reaction to the Coronavirus crisis and the lessons learned “For a united, resilient and sovereign Europe”.
Beyond the health tragedy, the Coronavirus crisis will have an accelerating effect on the major trends at work on our planet. It invites us to take a fresh look at the world, and at Europe’s place in the world. It forcefully revives the central question of our autonomy, our sovereignty and our position as a player in world geopolitics, particularly in the face of growing tensions between the United States and China.
The era of a conciliatory, if not naïve, Europe has come of age. Virtuous “soft power” is no longer enough in today’s world. We need to complement it with a “hard power” dimension, and not just in terms of military power and the badly needed Europe of defence. Time has come for Europe to be able to use its levers of influence to enforce its vision of the world and defend its own interests.
Faced with the sudden and devastating effects of the crisis, our fellow citizens are fully aware of the need for a resilient and autonomous Europe, assertive of its values, strong in its convictions, firm in its ambitions and confident of its means. A Europe ready to contribute to the great balances of tomorrow’s world.
In order to come out stronger out of the crisis, the European Union must be equipped with a recovery plan that is commensurate to the needs of its industrial ecosystems. That is the goal of the von der Leyen Commission’s proposal for a €750 billion recovery instrument, including direct grants and long-term loans. The magnitude of these resources will allow the EU to strengthen and modernise its internal market by taking solidarity, the basis of European integration, to a new level. This is an historic step.
The crisis has revealed areas where Europe needs to be more resilient to prevent and better withstand future shocks. These include health protective equipment and medicines of course, but also more broadly key technologies, certain critical raw materials (such as rare earths), security and defence industries and the media. Without isolating ourselves from our partners, without engaging in protectionism, everything calls for increasing our collective capacity to protect our own values and interests.
How would we justify our lack of ability to protect, where necessary, our strategic activities weakened by the crisis from predation by non-European players? We also clearly need to diversify and reduce our economic and industrial dependencies, as the pandemic has brutally revealed. And in the framework of our current security and defence alliances, we must also strengthen our strategic autonomy around common and interoperable capabilities, critical technologies and infrastructures (such as cyber security, drones, secure networks, quantum technology). Europe has the capabilities to do this. Does it give itself the means to do so?
In the wake of the crisis, Member States may feel the budgetary pressure in the defence field. That will make it more necessary than ever to spend better together, rationalise and strengthen our common capabilities, including in the field of EU external action. This requires an ambitious budget for the European Defence Fund and its industrial and innovation capacities, as well as for the European Peace Facility for stronger and more operational cooperation.
Europe must also equip itself with the means to protect itself against disinformation, the “infodemic” which has grown dangerously worse during the Coronavirus crisis. To counter attempts of manipulation by foreign powers. With its strong democratic values and principles, Europe can and must serve as a reference point in striking the fine balance between freedom of expression and the fight against disinformation.
Solidarity between EU Member States will be the keystone of tomorrow’s Europe – a more autonomous and sovereign Europe. Solidarity between generations through the Green Deal. Solidarity between Member States to preserve and develop our internal market. Solidarity to consolidate our economic and monetary union and strengthen our social cohesion. Solidarity in the field of security and defence. Solidarity, in sum, to protect our shared values that underpin our common project.
Josep Borrell, High Representative of the Union for Foreign Affairs and Security Policy, Vice-President of the European Commission
Thierry Breton, European Commissioner for the Internal Market, responsible for the defence industry
Compliments of the European Union External Action Service.

16 Jun
EACC

EACCNY #COVID19 Impact Stories from Our Members – European Space Agency

Together with our members we are creating a Video series of first-hand accounts of the Pandemic’s impact, both personally & professionally.

We invite you to join us today for a first-hand look at the impact of the global shutdown following the Coronavirus (COVID-19) outbreak – Today we are featuring Frank de Winne, Head of the Astronaut Center at the European Space Agency a Friend of the EACCNY.
The questions we asked our members for this series are:1) What are some challenges you, personally and your organization have faced?2) What are some of the most surprising (positive, innovative) responses/changes you have witnessed?3) How will this experience change us going forward, as a society and in terms of how we do business?
EACCNY has its finger on the pulse of how this worldwide pandemic is effecting companies and organizations on both sides of the Atlantic. EACC is where Americans & Europeans connect to do business.
Stay tuned for more on this series! We hope you enjoy these short vignettes our members and friends of the EACC created to share their experience.

Read More
16 Jun
EACC

The Global Economic Reset—Promoting a More Inclusive Recovery

June 11, 2020 | Blog Post By Kristalina Georgieva, Managing Director of the IMF
The COVID-19 crisis is inflicting the most pain on those who are already most vulnerable. This calamity could lead to a significant rise in income inequality. And it could jeopardize development gains, from educational attainment to poverty reduction. New estimates suggest that up to 100 million people worldwide could be pushed into extreme poverty, erasing all gains made in poverty reduction in the past three years.
“Policymakers must do everything in their power to promote a more inclusive recovery, one that benefits all segments of society.”
That is why policymakers must do everything in their power to promote a more inclusive recovery, one that benefits all segments of society.
Our new research, prepared jointly with the World Bank for the G20, focuses on how to increase people’s access to opportunities, no matter who they are and where they are from. More equitable access to opportunities is associated with stronger and more sustainable growth and higher income gains for the poor. But unlocking the full potential of all individuals is not an easy task.
The reality is that low-income households face higher health risks from the virus. They bear the brunt of record-high unemployment and are less likely to benefit from distance learning. Children’s nutrition may also be harmed by the disruption to school-provided meals. According to UN estimates, more than half a billion children worldwide have lost their access to education as a result of coronavirus lockdowns. Many won’t return to the classrooms after the pandemic, with girls more likely than boys to drop out.
These inequalities are truly shocking, but not unexpected. We know from experience and recent IMF analysis that major epidemics often exacerbate pre-existing income inequality.
A policy response like no other
The good news is that governments around the world have deployed extraordinary policy measures to save lives and protect livelihoods. These include extra efforts to protect the poor, with many countries stepping up food aid and targeted cash transfers. Globally, fiscal actions so far amount to about $10 trillion.
But given the severity of the crisis, significant further efforts are essential. This includes taking the measures needed to avoid a scarring of the economy, including from job losses and higher inequality. It is clear that increasing access to opportunities is now more critical than ever if we are to avoid persistent increases in inequality.
With this in mind, I would like to highlight three priorities:
1. Use fiscal stimulus wisely
Substantial fiscal stimulus will have to be deployed during the recovery phase to boost growth and employment. We know from the global financial crisis that countries that experienced larger output losses relative to the pre-crisis trend tended to have higher increases in inequality.
Yet securing a return to growth is not enough. Let’s remember the post-financial crisis reforms and investments that made banking systems more resilient. We will need a similar surge in reforms and investments during the recovery phase to significantly improve the economic prospects of the most vulnerable.
So, we will need a fiscal stimulus that delivers for people. This means scaling up public investment in health care to protect the most vulnerable and minimize the risks from future epidemics. It also means strengthening social safety nets; expanding access to quality education, clean water, and sanitation; and investing in climate-smart infrastructure. Some countries could also expand access to high-quality childcare, which can boost female labor force participation and long-term growth.
These efforts are critical to achieve the Sustainable Development Goals. But how can we significantly scale up spending when so many countries are now facing rising public debt? Public debt in emerging markets has risen to levels not seen in 50 years.
The IMF and the World Bank have championed debt service suspension as a fast-acting measure for countries that lack the financial resources to adequately respond to the crisis. The G20 has responded by agreeing to suspend repayment of official bilateral credit for the poorest countries, from May 1 through the end of 2020.
Over the medium term, there will be room to improve the efficiency of spending and mobilize higher public revenue. There will also be room for tax reform: for example, some advanced and emerging economies could raise their top personal income tax rates without slowing growth. Countries could ensure that the corporate tax system captures an appropriate part of the unusual gains received by the “winners” of the crisis, including perhaps from digital activities. And there should be a concerted effort to combat illicit flows and close tax loopholes, both domestically and internationally.
2. Empower the next generation through education
The virus-related disruption to education has left millions of children at risk of “learning poverty,” which means being unable to read and comprehend a simple text by age 10. Driven by poor access to quality schooling, learning poverty is already too high, especially in emerging markets and low-income nations.
Image Courtesy of the IMF.
We are also concerned about the long-term effects of the crisis on income and education gaps. In our research, we looked at the link between education and inequality. A 10-point increase in a country’s Gini coefficient (with such increases observed in some economies around the time of the global financial crisis) is associated with significantly lower educational attainment of about half a year. This could reduce lifetime earnings and cause income and opportunity gaps to become persistent across generations.
Image Courtesy of the IMF.
In other words, safeguarding our future means safeguarding our children. That is why we need more investment in education—not just spending more on schools and distance-learning capacity, but also improving the quality of education and the access to life-long learning and re-skilling.
These efforts can pay large dividends in terms of growth, productivity, and living standards. Simulations, based on a model reflecting an economy like Brazil, show that reducing the educational attainment gap by a quarter, relative to the OECD average, could boost economic output by more than 14 percent.
3. Harness the power of financial technology
COVID-19 has triggered a mass migration from analog to digital. But not everyone has seen the benefits; and the growing digital divide is set to become one of the legacies of the crisis.
What can policymakers do? A key priority must be to broaden the access of low-income households and small businesses to financial products, which will allow households to smooth consumption in the face of shocks and businesses to undertake productive investments. This “inclusion revolution” is now gaining momentum as governments are providing emergency cash transfers in record amounts. For example, in Pakistan and Peru, new support programs cover one-third of the population.
Reaching the most vulnerable can be challenging in developing economies, where nearly 70 percent of employment is informal. But this is where fintech opportunities abound. Think of the fact that about two-thirds of all unbanked adults (1.1 billion people) have a mobile phone, and one-quarter have access to the internet. Moving routine cash payments by governments into accounts could reduce the number of unbanked adults by 100 million globally, and even bigger opportunities exist in the private sector.
Of course, governments also need to manage fintech risks. Reforms are needed to promote competition, enhance consumer protection, and fight money laundering. Finding the right balance will be critical for lower inequality and growth.
Our research shows that greater access to finance and technology is associated with higher intergenerational income mobility. And we have estimated that there is a 2- to 3-percentage-point GDP growth difference over the long term between financially inclusive countries and their less inclusive peers.
Image Courtesy of the IMF.
In all these areas, the IMF is working with the World Bank and many other partners to support countries in this time of crisis. We are deeply committed to helping vulnerable groups through our hands-on technical assistance, policy advice, and lending programs. And we have increased our focus on social spending issues, including safety nets, health and education.
As they move forward, all governments will need to gear up for a more inclusive recovery. This means taking the right measures, especially on fiscal stimulus, education, and fintech. And it means sharing ideas, learning from others, and fostering a greater sense of solidarity.
If there is one lesson from this crisis, it’s that our society is only as strong as its weakest member. This should be our compass to a more resilient post-pandemic world.
Compliments of the International Monetary Fund.

11 Jun
EACC

EACCNY #COVID19 Impact Stories from Our Members – Richard Kibbe Orbe

Together with our members we are creating a Video series of first-hand accounts of the Pandemic’s impact, both personally & professionally.
We invite you to join us today for a first-hand look at the impact of the global shutdown following the Coronavirus (COVID-19) outbreak – Today we are featuring James Walker, Partner, Richard Kibbe Orbe a EACCNY member.The questions we asked our members for this series are:1) What are some challenges you, personally and your organization have faced?2) What are some of the most surprising (positive, innovative) responses/changes you have witnessed?3) How will this experience change us going forward, as a society and in terms of how we do business?

 
EACCNY has its finger on the pulse of how this worldwide pandemic is effecting companies and organizations on both sides of the Atlantic. EACC is where Americans & Europeans connect to do business.
Stay tuned for more on this series! We hope you enjoy these short vignettes our members and friends of the EACC created to share their experience.

11 Jun
EACC

ESMA renews its decision requiring net short position holders to report positoins of 0.1% and above

June 11, 2020 |
The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, has renewed its decision to temporarily require the holders of net short positions in shares traded on a European Union (EU) regulated market to notify the relevant national competent authority (NCA) if the position exceeds 0.1% of the issued share capital.

ESMA considers that its renewed measure will maintain the ability of NCAs to deal with any threats to market integrity, orderly functioning of markets and financial stability at an early stage, allowing them and ESMA to timely address such threats in case of signs of market stress.
The COVID-19 pandemic continues to have serious adverse effects on the real economy in the EU with any outlook for a future recovery remaining uncertain. While EU financial markets have partially recovered since 16 March 2020, this uncertainty is potentially threatening their future development and the stability of the financial system in the EU.
The measure applies from 17 June 2020 for a period of three months. The temporary transparency obligations apply to any natural or legal person, irrespective of their country of residence. They do not apply to shares admitted to trading on a regulated market where the principal venue for the trading of the shares is located in a third country, market making or stabilisation activities.
ESMA, in coordination with NCAs, continues to monitor developments in financial markets as a result of the COVID-19 situation and is prepared to use its powers to ensure the orderly functioning of markets, financial stability and investor protection.
The EFTA Surveillance Authority, in cooperation with ESMA, adopted a corresponding decision today, also effective as of 17 June, applicable to EEA EFTA States’ markets
Compliments of the ESMA.

11 Jun
EACC

2020 Blue Economy Report: Blue sectors contribute to the recovery and pave way for EU Green Deal

June 11, 2020 |
Today, the European Commission published “The EU Blue Economy Report 2020”, providing an overview of the performance of the EU economic sectors related to oceans and the coastal environment. With a turnover of €750 billion in 2018, the EU blue economy is in good health. There were also 5 million people working in the blue economy sector in 2018, representing a significant increase of 11.6% compared to the year before. Although sectors such as coastal and marine tourism, as well as fisheries and aquaculture are severely affected by the coronavirus pandemic, the blue economy as a whole presents a huge potential in terms of its contribution to a green recovery.
European Commissioner for Environment, Oceans and Fisheries Virginijus Sinkevičius said: “Maritime renewable energy, food from the sea, sustainable coastal and maritime tourism, the blue bio-economy and many other activities constituting the blue economy will help us come out of this crisis stronger, healthier, more resilient and more sustainable. We are doing everything we can to cushion the impact of the lockdown, protect the jobs in the blue economy and the wellbeing of our coastal communities, while retaining our environmental ambitions.”
Mariya Gabriel, Commissioner for Innovation, Research, Culture, Education and Youth, responsible for the Joint Research Centre (JRC), said: “We continue to support sustainable growth in the marine and maritime sectors through the European Union Blue Growth Strategy. Research and innovation are fundamental pillars of this European response. We will make sure that research, innovation and education contribute to the transition towards a European Blue Economy. Today’s report is part of this scientific support. It provides valuable insights into the economic performance of European marine activities and highlights the areas for priority action.”
While the marine environment is typically associated with traditional activities such as fishing or transport, it houses an increasing number of emerging, innovative sectors including marine renewable energy. The EU, world leader in ocean energy technology, is on track to produce up to 35% of its electricity from offshore sources by 2050.
For the first time, the report addresses the environmental dimension of the blue economy in detail, thereby also contributing to achieving environmental objectives. With a decrease of 29% of CO² per unit of gross value added between 2009 and 2017, fisheries and aquaculture growth is firmly decoupled from greenhouse gas production. Moreover, the report stresses the correlation between sustainable fishing and positive economic performance.
Greening is also ongoing in other sectors. Fuelled by the International Maritime Organisation’s 2020 sulphur cap, maritime transport is looking increasingly towards less carbon-intensive energy sources. In addition, a network of “green ports” is reducing the ecological footprint of these economically important hubs between the ocean and the mainland.
The report also looks at the economic value of several ecosystem services provided by the ocean, including habitats for marine life, carbon sequestration, and processes that influence climate change and biodiversity.
Blue jobs
With 5 million people employed in 2018, the number of jobs in the EU blue economy has increased by 11.6% from the previous year. This growth was mainly driven by the coastal tourism sector. Jobs in the offshore wind energy sector have multiplied nine-fold in less than 10 years.
These figures illustrate that the EU Blue Economy has overcome the devastating impact of the economic and financial crisis of 2008. As the current coronavirus crisis has an impact on all economic sectors, including the blue economy, the European Commission has taken strong measures early on to protect the EU economy, including the various sectors of the blue economy.
Background
The EU supports the blue economy through various instruments. The European Fund for Strategic Investments has invested over €1.4 billion in offshore wind projects and offered substantial support to other parts of the blue economy, including port development and clean shipping.
The BlueInvest Platform of the European Commission and the European Investment Fund has provided grants of €22 million in 2019 and €20 million in 2020, to innovative, starting blue economy entrepreneurs. In addition, a new BlueInvest Fund was created in 2020. Also the European Bank for Reconstruction and Development is financing a series of blue economy projects.
For More information
Blue Economy Report
Blue economy indicators online dashboard
European Commission – Maritime Affairs – blue economy
BlueInvest
Compliments of the European Commission.

11 Jun
EACC

Coronavirus: Commission recommends partial and gradual lifting of travel restrictions to the EU after 30 June, based on common coordinated approach

June 11, 2020 |
Today the Commission recommends to Schengen Member States and Schengen Associated States to lift internal border controls by 15 June 2020 and to prolong the temporary restriction on non-essential travel into the EU until 30 June 2020; and sets out an approach to progressively lifting the restriction afterwards.
Given that the health situation in certain third countries remains critical, the Commission does not propose a general lifting of the travel restriction at this stage. The restriction should be lifted for countries selected together by Member States, based on a set of principles and objective criteria including the health situation, the ability to apply containment measures during travel, and reciprocity considerations, taking into account data from relevant sources such as ECDC and WHO.
For countries towards which the restriction remains in place, the Commission proposes to enlarge the categories of permitted travellers to include, for instance, international students. The Commission is also issuing guidance to Member States to ensure that the resumption of visa operations abroad is well coordinated with the gradual lifting of the travel restrictions.
Commissioner for Home Affairs, Ylva Johansson,said: “Following the lifting of all internal border checks inside the Union, we are proposing a clear and flexible approach towards removing restrictions on travel to the EU starting on 1 July. International travel is key for tourism and business, and for family and friends reconnecting. While we will all have to remain careful, the time has come to make concrete preparations for lifting restrictions with countries whose health situation is similar to the EU’s and for resuming visa operations.”
Gradually removing restrictions on travel to the EU
Actions at the EU’s external borders must be coordinated and uniform to be effective. As travellers entering the EU can move freely from one country to another, it is crucial that Member States coordinate their decisions on lifting travel restrictions. This is why Member States should agree on a common list of non-EU countries for which travel restrictions can be lifted as of 1 July, to be reviewed on a regular basis. To this end, the Commission proposes:
• Objective criteria: The decision to lift restrictions for a specific country should be based on the epidemiological situation and coronavirus response in that country, the ability to apply containment measures during travel, and whether or not that country has lifted travel restrictions towards the EU. Restrictions should be lifted first with countries whose epidemiological situation is similar to the EU average and where sufficient capabilities to deal with the virus are in place. Restrictions should remain in place for countries whose situation is worse than in the EU. The Commission proposes a detailed checklist to help Member States reach a common assessment. Decisions on lifting travel restrictions would concern non-EU nationals residing in a specific country (not its nationals).
• Common and coordinated approach: The Commission proposes a coordination mechanism whereby it would support Member States and Schengen Associated States at technical level and facilitate the preparation of a list of countries for which travel restrictions could be lifted. Decisions on lifting restrictions should then be prepared with Member States under the EU’s integrated political crisis response mechanism. Member States should adopt such decisions in a coordinated manner and ensure uniform application across the EU. This will be a dynamic process and the integrated political crisis response mechanism would need to coordinate further updates.
• Flexibility: It will be possible to reintroduce travel restrictions for a specific country if the criteria are no longer met. In addition, Member States can still refuse entry to a non-EU traveller presenting a threat to public health, even coming from a country for which restrictions were lifted.
In line with the proposed checklist, the Commission also recommends to lift travel restrictions for Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia and Serbia as of 1 July, given that their epidemiological situation is similar or better than that of the EU. This also follows on the Commission’s readiness to closely associate the Western Balkans region with the implementation of the roadmap towards lifting containment measures.
Where the travel restrictions continue to apply, Member States should ensure that those travelling to study are exempted, together with highly skilled non-EU workers if their employment is necessary from an economic perspective and the work cannot be postponed or performed abroad. EU citizens and citizens of Schengen Associated States and non-EU nationals legally residing in the EU, as well as their family members, should also be exempt from the travel restriction regardless of whether or not they are returning home, as was the case until now.
In the roadmap on lifting containment measures presented on 15 April, the Commission indicated that travel restrictions within the EU would need to start being lifted gradually before restrictions at the external borders can be relaxed in a second stage. This is now well under way, with several Member States having already lifted restrictions within the EU and others planning to do so as of 15 June 2020. The Commission strongly encourages the remaining Member States to finalise the process of removing restrictions to free movement and lifting internal border controls within the EU by 15 June 2020.
Resuming visa operations
Most Member States decided to suspend or reduce the processing of visa applications as part of pandemic-related measures. Travellers will need to be able to access visa services again and Member States should synchronise the resumption of visa operations with the lifting of travel restrictions. This is why today the Commission presents guidance for a phased and coordinated return of visa operations to normal.
A harmonised approach is best achieved through consulates simultaneously resuming operations in each location and through full implementation of EU visa rules, together with good communication towards the public. The guidance also covers hygiene measures and precautions for receiving visa applicants.
Finally, if a Member State requires health checks, these should take place at the time of travel or shortly before, rather than when applying for a visa; and should apply to all travellers from a given location irrespective of their nationality or visa status. 
Background
The Commission invited Heads of State or Government on 16 March 2020 to introduce a temporary restriction on non-essential travel to the EU for an initial period of 30 days, subsequently extending it twice until 15 June.
The travel restriction, as well as today’s invitation to prolong it until 30 June, applies to all Schengen Member States (including Bulgaria, Croatia, Cyprus, and Romania) and the 4 Schengen Associated States (Iceland, Liechtenstein, Norway, and Switzerland) – 30 countries in total. All these countries implement it through national law.
Nationals of 105 countries are required to obtain a visa before travelling to the EU. Visa applications can usually be submitted at Member States’ consulates in almost all non-EU countries around the world. The EU’s visa policy for short stays is applied fully by 26 Schengen Member States and, in normal times, results in 15 million visas being issued each year.
For More Information
Communication on the third assessment of the application of the temporary restriction on non-essential travel to the EU, 11 June 2020
Checklist to be used for the possible lifting of the temporary restriction on non-essential travel to the EU, 11 June 2020
Guidance for a phased and coordinated resumption of visa operations, 11 June 2020
Press release – Coronavirus: Commission invites Member States to extend restriction on non-essential travel to the EU until 15 June, 8 May 2020
Press release – Coronavirus: Commission invites Member States to prolong restriction on non-essential travel to the EU until 15 May, 8 April 2020
Press release – Coronavirus: Commission presents practical guidance on implementing the temporary restriction on non-essential travel to the EU, 30 March 2020
Communication on the temporary restriction on non-essential travel to the EU, 16 March 2020
Compliments of the European Commission.

10 Jun
EACC

Shaping Europe’s digital future – Council adopts conclusions

The Council adopted conclusions today on shaping Europe’s digital future, addressing a wide range of issues related to the implementation of the EU digital strategy. The areas covered by the conclusions range from connectivity, digital value chains and eHealth to the data economy, artificial intelligence and digital platforms.
The text also highlights the impact of the digital transformation on fighting the pandemic, and its critical role in the post-COVID-19 recovery. 
“The COVID-19 pandemic and its consequences on our lives and economies have highlighted the importance of digitisation across all areas of the economy and society in the EU. New technologies have helped us all to stay connected, to work from our homes and to facilitate our children’s distance learning. They have been instrumental in keeping our businesses and public services running. The digital transformation will not only help address the current health crisis, but will also be a key engine for economic recovery, green growth and the strategic autonomy of the EU.” – Oleg Butković, Croatian Minister for the Sea, Transport and Infrastructure, President of the Council
The conclusions were adopted by a written procedure.
Council conclusions on shaping Europe’s digital future, 9 June 2020
Compliments of the European Council.

10 Jun
EACC

OECD Economic Outlook, June 2020

June 10, 2020 |
The OECD Economic Outlook is the OECD’s twice-yearly analysis of the major economic trends and prospects for the next two years. The Outlook puts forward a consistent set of projections for output, employment, prices, fiscal and current account balances.
Coverage is provided for all OECD member countries as well as for selected non-member countries. This issue includes a general assessment of the macroeconomic situation, a series of notes on the macroeconomic and structural policy issues related to the COVID-19 outbreak and a chapter summarising developments and providing projections for each individual country.
SUMMARY of the findings can be found here: OECD Economic Outlook, June 2020Read the FULL publication here: OECD Economic Outlook, Volume 2020 Issue 1The VIDEO Press conference can be found here: OECD Economic Outlook, Press Conference
After the lockdown, a tightrope walk toward recovery
The spread of Covid-19 has shaken people’s lives around the globe in an extraordinary way, threatening health, disrupting economic activity, and hurting wellbeing and jobs. Since our last Economic Outlook update, in early March, multiple virus outbreaks evolved into a global pandemic, moving too fast across the globe for most healthcare systems to cope with effectively. To reduce the spread of the virus and buy time to strengthen healthcare systems, governments had to shut down large segments of economic activity. At the time of writing, the pandemic has started to recede in many countries, and activity has begun to pick up. The health, social and economic impact of the outbreak could have been considerably worse without the dedication of healthcare and other essential workers who continued to serve the public, putting their own health at risk in doing so.
Governments and central banks have put in place wide-ranging policies to protect people and businesses from the consequences of the sudden stop in activity. Economic activity has collapsed across the OECD during shutdowns, by as much as 20 to 30% in some countries, an extraordinary shock. Borders have been closed and trade has plummeted. Simultaneously, governments implemented quick, large and innovative support measures to cushion the blow, subsidising workers and firms. Social and financial safety nets were strengthened at record speed. As financial stress surged, central banks took forceful and timely action, deploying an array of conventional and unconventional policies above and beyond those used in the Global Financial Crisis, preventing the health and economic crisis from spilling over into a financial one.
As long as no vaccine or treatment is widely available, policymakers around the world will continue to walk on a tightrope. Physical distancing and testing, tracking, tracing and isolating (TTTI) will be the main instruments to fight the spread of the virus. TTTI is indispensable for economic and social activities to resume. But those sectors affected by border closures and those requiring close personal contact, such as tourism, travel, entertainment, restaurants and accommodation will not resume as before. TTTI may not even be enough to prevent a second outbreak of the virus.
Faced with this extraordinary uncertainty, this Economic Outlook presents two possible scenarios: one where the virus continues to recede and remains under control, and one where a second wave of rapid contagion erupts later in 2020. These scenarios are by no means exhaustive, but they help frame the field of possibilities and sharpen policies to walk such uncharted grounds. Both scenarios are sobering, as economic activity does not and cannot return to normal under these circumstances. By the end of 2021, the loss of income exceeds that of any previous recession over the last 100 years outside wartime, with dire and long-lasting consequences for people, firms and governments.
The pandemic has accelerated the shift from “great integration” to “great fragmentation”. Additional trade and investment restrictions have sprung up. Many borders are closed across large regions and will likely remain so, at least in part, as long as sizeable virus outbreaks continue. Economies are diverging, depending on when and to what extent they were hit by the virus, the preparedness of their healthcare system, their sectoral specialisation and their fiscal capacity to address the shock. Emerging-market economies have also been shaken by the crisis. Commodity prices have plummeted. Large capital outflows, plummeting remittances, weaker healthcare systems and a large share of informal workers have threatened their health, economic and social resilience. Everywhere, the lockdown has also exacerbated inequality across workers, with those able to telework generally highly qualified, while the least qualified and youth are often on the front line, unable to work or laid off, with the effects further compounded by unequal access to social protection. Private debt levels are uncomfortably high in some countries, and business failure and bankruptcy risks loom large.
Extraordinary policies will be required to walk the tightrope towards recovery. Even if growth does surge in some sectors, overall activity will remain muted for a while. Governments can provide the safety nets that allow people and firms to adjust, but cannot uphold private sector activity, employment and wages for a prolonged period. Capital and workers from impaired sectors and businesses will have to move towards expanding ones. Such transitions are difficult, and rarely happen fast enough to prevent the number of failing firms from rising and a sustained period of unemployment. Governments will need to adapt support and accompany the transition, allowing fast restructuring processes for firms, with no stigma for entrepreneurs, providing income for workers in between jobs, training for those laid off and transitioning to new jobs, and social protection for the most vulnerable. We have previously called for a rise in public investment in digital and green technologies to promote long-term sustainable growth and lift demand in the short term. This is even more urgent today with economies having been hit so hard.
Today’s recovery policies will shape economic and social prospects in the coming decade. Ultra-accommodative monetary policies and higher public debt are necessary and will be accepted as long as economic activity and inflation are depressed, and unemployment is high. However, debt-financed spending should be well targeted to support the most vulnerable and the investment necessary for a transition to a more robust economy. Public support needs to be transparent and fair. Corporate support from governments must come with transparent rules, with private bond and equity holders taking a loss when government steps in, so that their rewards for taking risks are not excessive. Improving employer-employee relationships should accompany ongoing public support for workers and firms, paving the way for stronger social cohesion and ultimately a stronger and more sustainable recovery.
The recovery will not gain steam without more confidence, which will not fully recover without global cooperation. Confidence needs to be boosted both at the national and international levels. Household saving rates have soared in most OECD countries, with high uncertainty and rising unemployment holding back consumption. Trade disruptions and the associated threats to supply chains also impede the necessary reduction in uncertainty for investment to resume. Global cooperation to tackle the virus with a treatment and vaccine and a broader resumption of multilateral dialogue will be key for reducing doubt and unlock economic momentum. The international community should ensure that when a vaccine or treatment is available it can be distributed rapidly worldwide. Otherwise the threat will stay. Likewise, resuming a constructive dialogue on trade would lift business confidence and the appetite for investment.
Governments must seize this opportunity to engineer a fairer and more sustainable economy, making competition and regulation smarter, modernising government taxes, spending, and social protection. Prosperity comes from dialogue and cooperation. This holds true at the national and global level.
AUTHOR:
• Laurence Boone, OECD Chief Economist
Compliments of the OECD.
 

10 Jun
EACC

Federal Reserve Board expands its Main Street Lending Program to allow more small and medium-sized businesses to be able to receive support

June 08, 2020 |
The Federal Reserve Board on Monday expanded its Main Street Lending Program to allow more small and medium-sized businesses to be able to receive support. The Board lowered the minimum loan amount, raised the maximum loan limit, adjusted the principal repayment schedule to begin after two years, and extended the term to five years, providing borrowers with greater flexibility in repaying the loans. The Board expects the Main Street program to be open for lender registration soon and to be actively buying loans shortly afterwards.
“Supporting small and mid-sized businesses so they are ready to reopen and rehire workers will help foster a broad-based economic recovery,” Federal Reserve Chair Jerome H. Powell said. “I am confident the changes we are making will improve the ability of the Main Street Lending Program to support employment during this difficult period.”
Small and medium-sized businesses are a vital part of the economy and employ tens of millions of people, and, because their needs vary widely, the Board has extensively sought feedback and revised the Main Street program accordingly.
The changes include:
• Lowering the minimum loan size for certain loans to $250,000 from $500,000;
• Increasing the maximum loan size for all facilities;
• Increasing the term of each loan option to five years, from four years;
• Extending the repayment period for all loans by delaying principal payments for two years, rather than one; and
• Raising the Reserve Bank’s participation to 95% for all loans.
The chart below has additional details on the changes.
Once they have successfully registered for the program, lenders are encouraged to begin making Main Street loans immediately. The Main Street Lending Program intends to purchase 95% of each eligible loan that is submitted to the program, provided that the required documentation is complete and the transactions are consistent with the relevant Main Street facility’s requirements. The Main Street Lending Program will also accept loans that were originated under the previously announced terms, if funded before June 10, 2020.
Nonprofit organizations play a critical role throughout the economy, and the Board is working to establish a program soon for these organizations.
The Main Street Lending Program was established with the approval of the Treasury Secretary and with $75 billion in equity provided by the Treasury Department from the CARES Act. Additional frequently asked questions and answers for lenders and borrowers are also available. The form participation agreement and other legal forms will be updated to align with the changes announced today.
Main Street Lending Program Loan Options
New Loans
Priority Loans
Expanded Loans
Term
5 years(previously 4 years)
Minimum Loan Size
$250,000(previously $500,000)
$10M
Maximum Loan Size
The lesser of $35M, or an amount that, when added to outstanding and undrawn available debt, does not exceed 4.0x adjusted EBITDA(previously $25M)
The lesser of $50M, or an amount that, when added to outstanding or undrawn available debt, does not exceed 6.0x adjusted EBITDA(previously $25M)
The lesser of $300M, or an amount that, when added to outstanding or undrawn available debt, does not exceed 6.0x adjusted EBITDA(previously $200M)
Risk Retention
5%
5%(previously 15%)
5%
Principal Repayment
Principal deferred for two years, years 3-5: 15%, 15%, 70%
(previously principal deferred for one year and 33.33% repayment due in years 2-4)
Principal deferred for two years, years 3-5: 15%, 15%, 70%
(previously principal deferred for one year and 15%, 15%, 70% repayment due in years 2, 3, and 4, respectively)
Interest Payments
Deferred for one year
Rate
LIBOR + 3%
Compliments of the Federal Reserve Board.

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