financial crisis

Behind the scenes of Brussels – Containment: the debate prohibited

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It only took a few moments, on March 16, for the Head of State and his government, in the name of the fight against the coronavirus pandemic, to place the French under house arrest and deprive them of most of their freedoms civil, political and social that we thought inalienable: freedom to come and go, freedom of assembly, freedom to undertake, freedom to work, etc. Justice has almost been brought to a halt, lawyers confined, provisional detentions automatically extended, the police (understood in a very extensive sense since they include municipal police officers and the like) invested with full powers apply these custodial measures.

Containment without legal basis

This suspension of the rule of law was done without legal basis. Indeed, the decree of March 16 restricting the movement of citizens does not fall within the powers of the executive, since only a judicial judge, the liberty judge, can normally decide on an individual basis. Nevertheless, administrative justice, in this case the Council of State, validated it on the basis of the jurisprudential theory of “exceptional circumstances”, which is probably not its most inspired decision.

It was only on March 23 that Parliament gave a legal basis to the measures announced on March 17 by hastily passing the law creating a “state of health emergency” which authorizes the government to trigger it “in the event of a disaster. health endangering, by its nature and gravity, the health of the population ”, a particularly vague definition. This whole law cultivates vagueness, the offenses it provides for example leaving a large part to police interpretation and therefore to arbitrariness. Renewable by Parliament – possibly for a period longer than two months – it gives full powers to the executive, Parliament being stripped of its powers and reduced to the role of mere spectator. If the Assembly has not changed the government’s plan, the majority being what it is, the Senate, dominated by the classic right, has fortunately managed to introduce some safeguards in this improvised text and poorly put together in providing in particular that it will cease to apply in any event on 1er April 2021, unless a law to the contrary is passed. A fundamental clarification which the government services had curiously not thought of.

Not quite a dictatorship

It is remarkable that this exceptional legislation, justified by the use of a warlike language unique in Europe (“We are at war”) was not the subject of a referral to the Constitutional Council, the opposition, all as forbidden from terror as public opinion, having given up exercising its rights, an unprecedented fact, when it is a particularly serious attack on the rule of law. The constitutional judges were only seized on one point of detail, the suspension of the time limits to judge the questions preliminary of constitutionality (QPC), a provision which it moreover validated.

As long as the state of health emergency applies (until the end of July we have just learned), France is no longer a democracy, even if it is not quite a dictatorship. In his time, François Mitterrand denounced the “permanent coup” that were the institutions of the Fifth Republic. The coronavirus has made it possible to carry out this institutional logic. The head of state, relying on a submissive majority and facing non-existent opposition, seized all the levers of power by invoking the need to preserve the health of the French and a health emergency that he does did not want to see it coming, he who ten days earlier encouraged the French to continue living as before.

This parenthesis of the rule of law was accompanied by the brutal halt of a large part of the economy, a logical consequence of confinement. Above all, the government decided, without any consultation, which businesses could remain open, forcing companies to lay off more than 11 million private sector workers.

Lack of debate

It is truly staggering that these exceptional powers entrusted to the State to apply a brutal and without nuance confinement to an entire country, one of the hardest in Europe with those of Spain, Italy and Belgium , did not give rise to any debate, as if there was no other choice. However, never a democracy used in the past this method to fight against a pandemic (there was only partial confinements at the beginning of the previous century), in particular during the Spanish flu of 1918-1919, of the Asian flu of 1959 or of the Hong Kong flu of 1969. The fact that containment was a solution invented by China, a totalitarian regime, to contain the coronavirus pandemic should at least have questioned its legitimacy. However, it imposed itself almost naturally, all playing in reality when Italy took the decision to confine the whole of its population from March 10, which caused a domino effect, each wanting to show that he was also keen to protect its population: Spain imposed it on March 15, France on March 16, Belgium on March 18 …

However, there was room for debate and on all fronts. On the principle of containment itself first. Because it is only a stopgap aimed at slowing the spread of the virus and avoiding congestion in hospitals which could result in additional deaths. Clearly, the virus will continue to circulate and kill those it must kill after the containment is lifted – in a proportion that no one knows – since it does not exist and will not exist for one or two years a vaccine and that treatments are still in the experimental stage.

Containment is a political trap

Obviously, no one realized that it was going to be very difficult to get out of the containment once decided without political damage, a part of the public opinion risking to be self-persuaded over the days that it is in eradicating the disease. If the pandemic continues to kill, and it will, the government will be automatically accused of endangering the health of its citizens to save “the economy”, a swear word for some French people as if working for a living was secondary to health… In other words, the temptation will be strong to return to blind confinement to silence the controversies or to get out of them as late as possible, the path chosen by France after six weeks of state of emergency sanitary.

This is also why countries like Sweden, Switzerland, Germany or the Netherlands either have not adopted this strategy, letting life take its normal course, or have applied it with much more finesse, which made it possible to avoid passing through the box of exceptional powers entrusted to the executive and especially to break the economy.

Why confine an entire country?

This total foreclosure of a country is all the more questionable since whole regions were and are almost untouched by the virus: why impose the same treatment in Creuse as in Ile de France, in Puglia as in Milan ? Why not have it confined to the extent of the pandemic, just like Germany, where the Länder are competent in public health, has done with the success we know? Thus, from the start, two foci were identified in France: the Oise and Mulhouse. However, rather than reacting immediately by isolating these two regions and deploying military medical means to relieve hospitals, the government procrastinated, allowing the virus to spread. It remains staggering that it was not until March 24, a week after the decision to confine the country, that the military medical service was sent to reinforce Mulhouse! From there to think that total containment was also motivated by the inability of the authorities to anticipate the crisis, there is only one step that I will be careful not to take.

Similarly, the choice of companies to close and the precautions to be taken would also have been a possible area of ​​discussion. For example, it quickly became known that air conditioning allowed the virus to circulate more than a meter and contaminate many people. So does closing shoe repair shops, art galleries or florists and leaving supermarkets open make medical sense? Likewise, was school closure necessary? All this was left to the discretion of a bureaucracy without control and without any consultation with all economic and social actors.

Why place an entire population under residence?

Finally, it appeared very early on that the disease was overwhelmingly fatal for people over the age of 70 (average age of death in Italy or France: 80) and those with serious pathologies, in particular clear the weak. Was it therefore rational to confine all assets and plunge the country into recession? Perhaps we should have focused on protecting these at-risk groups rather than putting a whole country under wraps without thinking of tomorrow, especially since we know full well that the virus is here for a long time.

The debate becomes, at this point, particularly emotional, because it refers to our relationship to death. Why has such a pandemic, which is not the first the world has faced and which is especially far from being the most deadly in history, led states to decide on unprecedented measures while knowing that they were not a cure? Why such a panic, especially when you compare the mortality caused by the coronavirus with that of other diseases? Although we must still be careful, since five months after its appearance, we still know very little about covid-19, which should warn us about the scientism that seized us, the doctors having said everything and its contrary to this pandemic, making political decision particularly difficult. However, let’s remember that 400,000 new cancers are diagnosed each year in France and that 150,000 French people die from it, and yet tobacco and alcohol are still not banned, while that would avoid much of it. If all life deserves to be saved, why be so casual about cancer? Similarly, seasonal flu (while there is a vaccine that a large majority considers dispensable) kill each year between 3,000 and 15,000 people (not to mention the more than 30,000 deaths from the Hong Kong flu in 1969 in a country of 51 million inhabitants or the equivalent number of deaths in 1959 in a country of 45 million inhabitants), seasonal respiratory infections 68,000 people, road accidents 3500 people to which must be added the disabled for life. And yet, no one has thought of banning the car (and every measure aimed at strengthening safety has its share of protests, remember the 80 km / h) or to make the fight against pollution or junk food a categorical imperative.

If we look at the statistics of mortality in the world, we see that hunger (yet easy and inexpensive to eradicate), malaria, AIDS or even wars (often made with the weapons produced by our industries) kill infinitely more than the coronavirus will ever kill.

Choose your comrade side, but there is only one good side, that of containment!

It would probably be necessary to question the responsibility of the audiovisual media in this panic which has taken hold of Western public opinion (with a German exception, German televisions having voluntarily decided to treat covid-19 in the place it deserves). Announce every morning the number of dead without putting them in perspective (compared to the usual average of the dead, their age, the comorbidity from which they suffered, etc.), devote entire newspapers to the pandemic can only shake even the best made heads … Imagine that every morning the number of deaths in France is truncated for all causes and that all the newspapers are devoted to it: who would still dare to simply live?

This is not to say that a death is immaterial, but simply that any public policy must be subject to a cost-benefit assessment. If we do not ban the sale of weapons, tobacco, alcohol, cars, trucks, thermal power stations, it is because collectively we believe that the cost would be greater than the benefit we would derive from it. But this debate, in the emotional surge that has been going on for two months, is in fact prohibited. Those who dared to question the chosen strategy and especially on its duration were pilloried by the most radical, those who are heard. To be opposed to the prolongation of confinement is to be for the “sacrifice” of those who are sick, “to spit in the mouth of the dead” and so on. In short, choose your comrade side, but there is only one good side, that of containment! I have even been threatened with death, myself and my family, by good people who believe that all life must be saved at any cost without the contradiction of their words touching their minds for daring to me. question in two tweets from April 9, three weeks after the start of confinement: ” It’s crazy when you think about it: plunging the world into the worst recession since the Second World War for a pandemic that has so far killed less than 100,000 people (not to mention their advanced age) in a world of 7 billion inhabitants. Seasonal flu, which kills especially young children, is between 290,000 and 650,000 per year worldwide. And everyone fucks, but serious. “

The worst recession of all time outside of the war (and more)

However, confinement will lead to an unimaginable recession by its violence: it should reach between 8% and 15% of GDP, an unprecedented decline in activity in peacetime (we must go back to 1942 to record a recession of -10 %). We have never brought an economy to a complete halt as we have just done, we must be aware of this. Partial unemployment now affects nearly twelve million workers (one in two private workers!) And the layoffs caused by thousands of business bankruptcies will number in the hundreds of thousands or even millions once the partial unemployment scheme supported by the state will expire (because it costs a fortune). And the longer the shutdown, the more difficult it will be to restart. The cost generated by the establishment of a social safety net and by economic plans will lead to an unprecedented deterioration in public accounts and the young generations who will have to pay twice for confinement: by the loss of their jobs and by raising taxes for those who will keep it.

It should not be forgotten that unemployment is also a health catastrophe, but more diffuse and therefore socially more acceptable: we thus estimate at 14,000 the deaths which it causes each year in France by induced diseases. And how not to speak of its procession of misery, hunger, social downgrading, etc. The effects of confinement are also going to have terrible consequences on the minds of French people, on violence against women and children, on their health (for example, early screenings for cancer, stroke, heart attack are suspended and nothing is known about suicides, etc.), about dropping out of school (how many children have simply disappeared from the system? ).

A lastingly weakened rule of law

Finally, to believe that public freedoms, democracy, will come out intact from this episode is just a sweet dream. The state of health emergency will remain enshrined in our law for a long time exactly as the state of emergency, launched in 2015, was finally incorporated into ordinary law. It is rare for a state to give up on its own the powers gained over the legislature and the justice system. The tracking of individuals, via smartphones, which some consider to be a necessity, could well become the rule in the name of safeguarding our health which has become THE priority, privacy being reduced to the rank of concern of another age. Having chosen total containment and the state of emergency will leave lasting traces in French democracy.

I do not pretend to provide an answer here. Simply, the first elements of the deconfinement show that another way would have been possible: confinement not department, wide discretion left to local authorities, referral to the judicial judge to register the carriers of the virus, etc. I just regret the absence of democratic deliberation before the establishment of the state of health emergency and its extension. As if sacrificing generations under the age of 60 and suspending the rule of law were obvious facts.

In provisional conclusion, I think that we should not be mistaken about the meaning of the unimaginable event that we are experiencing: it is the triumph of individualism, that of the immediate health of the individual in the face of well-being current and future collective. The terms of the debate are in reality identical to those of climate change: should we accept to sacrifice our immediate well-being to ensure the survival of the human species?

Some reading tips:

Note from the magistrates’ union on the state of health emergency

“Let us beware of falling into a sickly, viro-induced, social and political reactivity”

The catastrophic cost-benefit of containment

Breaking out of blind confinement

Dare to discuss confinement (a Belgian point of view)

Will the remedy ultimately be worse than the coronavirus? (a Swiss point of view)

“Let us die as we wish” and “I prefer to catch covid-19 in a free country than to escape it in a totalitarian state”

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“A crisis first and foremost health”

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La Croix: We often compare this crisis to that of 1929, what do you think?

Pierre-Cyrille Hautcœur : The current crisis is first and foremost a health crisis. It is linked to an exogenous factor in the functioning of the economy, a virus, and not to the bursting of a speculative bubble on the stock market, real estate, financial as in 1929, in 1987 or 2008. It cannot either no longer be compared to the situation of a war economy, which is characterized by the destruction of physical capital.

→ LIVE. Coronavirus: the latest news in France and worldwide

Today is different. Faced with a major public health risk, several countries have decided to suspend a large part of the economy in order to stem the Covid-19 pandemic. But, if they chose it, it is not clear that today it is possible to backtrack. This crisis can therefore lead to economic and political changes that we cannot predict.

So the situation is unprecedented?

P.-C. H. : In reality, it closes a bracket in some respects, because for centuries epidemics have weighed on the economy more strongly than anything else. We have forgotten them a little in the Western world, because they were eradicated by medicine and public policies that allowed access to drinking water, garbage collection … These were massive investments made between 1830 and 1950 in the West, which we must now support in developing countries to prevent epidemics from killing millions and returning to us strengthened.

We are talking in this crisis of access to public services, of strategic sovereignty of States (in the medical sector …). Do you see other lessons?

P.-C. H. : This crisis is bringing to light a crucial issue, that of the quality and speed of information production, in order to react quickly and efficiently. In economics, the better we know each person’s situation (household, small or large business, self-employed worker, etc.), the better the support can be adapted.

In the medical field, it is a question of determining how to build quality information on the pandemic, knowing who is contaminated or not and the means used for this (geolocation or not …). This raises formidable, technological, ethical and even more political questions. Crises are often accelerators for changes in society, and society will no doubt escape the rule.

Some are calling for a new Marshall Plan for Europe, funded by the ECB, which would promote a more environmentally friendly economic model …

P.-C. H. : At this point, states are doing what they can to support households and businesses. If the confinement lasts a long time, it may be necessary to envisage a revival for the sectors most in difficulty, or even initiate structural transformations – notably in favor of the environment – which the crisis could accelerate.

→ READ. Faced with the coronavirus crisis, a new Marshall plan?

As for whether the ECB can play a role in supporting these transformations, I am rather reluctant because I fear that too much will be asked of central banks. First of all, politically, we have to find new ways out of this crisis.

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The average ticket for Bonpreu customers is doubled due to confinement

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The supermarket sector is based on having a precision operation, where every detail counts and allows you to often compete for a penny to win customers. As a result, companies in this field have become accustomed to increases in sales, which are usually around GDP and rarely reach double digits. But the coronavirus has completely altered this reality.

As ARA has learned, Bonpreu, the first supermarket chain in Catalonia, has seen the average customer ticket double since the population was confined. To contextualize the jump, in 2018 the group increased sales by 13%, and a year earlier by 11%. The evolution of 2019 is not yet known, but in 2020, even without knowing how long the current situation will last, it promises to be better for the 35th Catalan company in sales.

Its 187 stores, which also include those of the Esclat brand, have made this leap without resorting to price increases, the company says. The company chaired by Joan Font has carried out a study, based on the 1.2 million purchases made on average during the weeks of the state of alarm, which allows us to observe customer behavior. The conclusion is very clear: commodities are living a golden age.

The frozen fish boom

The closure of fishmongers triggers the purchase of 151%

Of all the products, the jump in the sale of frozen fish stands out, with an increase of 151%. Meat has also experienced a sharp increase in sales, of about 50%. Bonpreu stands out above all for the increase in lamb, processed meats, skewers, steaks and pork chops.

Rising fruits and vegetables

Potato and zucchini, the amazing kings of the shopping basket

The data from the Osona company also make it clear that the consumption of fruit and vegetables has increased in recent weeks. The vegetable, in particular, 54%, and the fruit, 33%. Bonpreu has detected that in the vegetable basket, the most successful in this time are the zucchini and the potato.

Packaging is growing

From pasta and rice to sweets, the snacks and beers

The company has also seen a very significant increase in sales of packaged food products. The increase, in particular, is 80%. This food group serves to check the change in consumption trend from the beginning of confinement until now. The study finds that initially there was more purchase of commodities such as preserves, pasta and rice, and that it later changed to products more associated with celebrations or moments of pleasure, such as beers, snacks and sweets like chocolate.

More cleanliness than ever

Sales of products such as bleach are doubled

The wave of shopping has also reached for household cleaning and personal hygiene products, such as soap, bleach and toilet paper. In this area, sales have almost doubled, with an increase of 99%.

Pricing policy

The supermarket group denies they went up

Bonpreu says that almost all the prices of these food families have remained the same as last year. In fact, the company claims that soups and broths, liquid milk, soup pasta and butter have been sold during confinement at lower prices than last year.

Bonpreu even explains that in its establishments, and despite the success of sales that are taking place throughout the sector, the promotions have been maintained, covering half a thousand products. This same week, The Economist echoed a study that explained that the percentage of household spending on food has gone from 18% to 60% due to confinement, in a phenomenon that even compromises the validity of indices such as the CPI in all countries.

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Lebanese strangled by collapsing currency

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In Lebanon, prices have “Doubled or even tripled” in the space of a few weeks. Like many of her compatriots, Julie Daccache is worried by the rapid deterioration of their economic situation, that of poor families, but also those who previously belonged to the “Middle class and who, too, can no longer cover their food expenses”.

→ ANALYSIS. Lebanon suffocated by banking crisis

“A box of powdered milk, which was worth 20,000 Lebanese pounds, is worth more than 50,000 today”, she says. “The price of a pack of fifty diapers has gone from 15,000 pounds to 40,000 these days. Just for a baby under 6 months old, a family’s monthly budget is 100,000 Lebanese pounds. “

With others, she has just set up a solidarity network, Kulluna Wahad, “Tous Unis”, intended for young children. Volunteers are currently identifying needs from the north to the south of the country by contacting “Mayors, hospitals, pediatricians”, and “Especially not the politicians”. Friday, April 24, the association was able to conduct its first distribution of milk, wipes, diapers, shampoo, etc.

One more symptom of the crisis

The vertiginous fall of the Lebanese pound is one more symptom of the serious economic and financial crisis that Lebanon is going through. Worse still by the confinement imposed by the fight against the coronavirus, it continues amid distrust of the political authorities: accused of having led the country to bankruptcy, by enriching themselves in the process, they are today suspected of not taking the right measures.

Coronavirus, too much burden for a Lebanon already in crisis

In principle, the national currency, indexed on the greenback since 1997, is exchanged in banks at the fixed rate of 1,507 pounds. But in the absence of sufficient foreign exchange reserves, the latter no longer distribute their dollars more than a dropper to their depositors, forcing them to resort to the black market. However on this one, the greenback crossed last week the symbolic bar of 3,000 pounds and even 4,000 pounds Friday, April 24.

→ READ. Coronavirus: first case reported in a Palestinian refugee camp

Nothing seems to be able to stop the slide, not even the injection of dollars by the central bank. “Between the time we placed our orders and the time we were delivered, prices had gone up again”, says Julie Daccache, who wonders how her donors will be able to continue to support her.

Dollar payments

Much criticized since the start of the crisis, the management of the Banque du Liban is once again concentrating criticism. Friday, April 24, a sit-in was organized in front of its headquarters in Beirut by the Committee of parents of Lebanese students abroad “To demand stabilization of the value of the pound”, reports the daily East-Day.

Even inside the country, the situation looks dire. Wherever you are and as long as you pay by card, the choice is always left to pay “In pounds or dollars”, says a teacher. “But in some places, payment in dollars is required. The other day, my doctor asked me to pay my consultation for $ 100. Even if today some people have to agree to be paid in pounds, how are families going to earn no more than 10,000 pounds a month? “

A call to protest

If she herself is pleased to have been able to take out a mortgage in the national currency, one of her friends from Beirut had no choice: “Her repayments climbed from $ 1,350 a month to more than $ 1,800: she could no longer pay back and she had to sell her apartment. “ Especially if some private companies paid their employees in dollars before the crisis, most opted for a payment in equal parts in both currencies, and today “Entirely in pounds, and of course by converting the sum at the official rate!” “

→ READ. Lebanon declares itself in default on its debt

Like hunger, anger is raging in the land of Cedars. Earlier this week, as parliament met to consider a bill to fight corruption in the public sector, and another on the amnesty of some actors in the civil war, the actors in the popular uprising unleashed the October 17 launched a call to demonstrate. To respect the rules of physical distance, it was aboard their cars that the Lebanese protested in Beirut, Tripoli (north) or Saida (south), claiming “Reforms” and “The return of stolen money”.

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EU postpones response to economic emergency again (Júlia Manresa Nogueras)

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The eurozone economy could fall by 15% due to the coronavirus pandemic. The impact is clear when you put it next to the 4.9% drop that was experienced in 2009. It is the warning to sailors with which the President of the European Central Bank (ECB), Christine Lagarde, tried to raise awareness leaders so that they do not do “too little and too late” and approve a “fast, firm and flexible” recovery plan. And the Twenty-seven know that, but they still don’t agree on how to do it. In recent days, positions have come closer, especially after the South renounced any debt pooling. Yesterday they agreed to create an economic recovery fund that will be linked to the new EU budget, but they have not agreed on the size, the form, or how to distribute the money, if it sees more credit (as the north wants) or to through direct transfers (as required by the south).

The brutal work will be up to the Commission, which, after listening to everyone and gathering ideas from all over, has to come up with a proposal in the coming weeks that tries to gather all the concerns. Then the leaders will have to give the final green light, and all this leaves the final decision for June, when they hope to meet physically. And this despite the “emergency” awareness that the President of the European Council, Charles Michel, admitted yesterday after a video conference that closed without a document of conclusions, despite the fact that it was a key appointment to avoid the unequal collapse of the European economy and for the integrity of the single market itself. As the President of the Commission, Ursula von der Leyen, warned, without “decisive and collective action, the recovery will not be symmetrical and divergences will increase”.

But after so many comings and goings, where is the discussion now? Coronabons are definitely ruled out and a half-trillion shield in credits (for companies, ERTOs and healthcare systems) has been approved, which will be launched in June. With this decided, the debate revolves around how to articulate an economic recovery fund linked to the EU budget for the period 2021-2027 and which must be debated again. The discussion is stalled precisely because the north did not want to contribute more money. All of this will now be mixed up, which for some may further delay the discussion while for others it may be the necessary push.

The figures also generate some consensus around 1.5 trillion, but how this sum will be reached is a mystery. That is why, after gathering all the positions of the different European blocs, the leaders have left the final proposal in the hands of the Commission, also because it is Brussels that has the legislative initiative. Von der Leyen presented to the leaders yesterday a proposal for funds linked to the European Community budget that “will find the right balance between loans and direct transfers”. To reach up to 1.6 trillion euros (which is the plan he is working on), it would be necessary to raise the spending ceiling of the EU budget for the coming years and support a debt issue from the European Commission itself ( which has already been done before) and which, in practice, does not involve mutualization of the debt, precisely because the money is then made available to states that request it through transfers or cheap credits. From there, different internal or budget-related mechanisms would mobilize this high amount. In fact, the draft proposal foresees that the fund will only contain about 320 billion euros and that the rest of the money, up to 1.5 trillion, would be activated through various mechanisms of the community budget.

The Commission has presented this first draft after France presented the first fund idea with shared debt, the Netherlands its with gifts from north to south, and Spain its with perpetual debt issued from Brussels, a proposal that finally Italy take on. Perpetuity is already completely ruled out, but Paris, Madrid and Rome are pushing for the debt to be issued in the very long term. Knowing all this, now the battle is between credits and transfers and also in the pace of response. Therefore, the different European leaders appeared with relative satisfaction and full of nuances.

French President Emmanuel Macron was blunt: “Europe’s borrowing is not up to the task. Because? Because loans would already add to the debt of the most fragile countries and worsen financial imbalances. ” Macron is clear that with more credit the problem is not solved: “They must be real transfers, budget transfers.”

In the same vein, Italian Prime Minister Giuseppe Conte called for urgency and even called for a “bridge” mechanism to gain access to these transfers, given that they may not be effective until the end of the year. But for his Dutch counterpart, Mark Rutte, the emergency is resolved with half a trillion credits activated by the Eurogroup and which include the rescue fund that neither Spain nor Italy want to ask for. “There are 520 billion euros available, I would be stunned if we spend them all before the end of the year,” said the Dutchman yesterday, assuming that to finish detailing everything will take time and also that the recovery fund it will be structured mostly in the form of credits. Pedro Sánchez did not appear in Spain, but the Minister of Foreign Affairs, Arantxa González Laya, did so, claiming the role of Spain “at the center of the game” in changing the tone of the talks, although the demands Spanish initials have been diluted and that the south, for now, is the one who has yielded the most.

Italy

The country most affected by the pandemic and also one of the weakest economies in the EU with 135% debt. From the beginning he demanded to share risks, mutualizing debt so as not to have to borrow more, but he has already yielded in this line and now accepts a fund of 1.5 trillion euros in perpetual debt to give direct transfers , no credits.

Netherlands

It’s the other end of the story. He has managed to remove the coroners from the debate and now focuses his opposition on how to distribute the money from the recovery fund. He wants it to be just credits and that if there are transfers they are made through the EU budget, a budget that The Hague does not want to see fattened at the expense of its southern neighbors.

Spain

It has made hinge. He was on the side of Italy at the beginning of the discussion, but has abandoned debt pooling. Italy made the turn after Spain presented a proposal similar to the French one and it picked up ideas that the socialist commissioners had already dropped: a fund of 1.5 trillion through debt issued by the Commission and backed by an increase in EU budget and that would be perpetual. The latter part is ruled out by the northern opposition. Spain asks for transfers and not credits, but would accept a combination of the two.

Germany

He always stands firm against the coronabons and on the side of The Hague, but seeking to focus the debate. That is why Berlin said this week that it was willing to increase its contribution to the EU budget has been key to making the issuance of debt by the European Commission a viable project.

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Oil price: So dangerous is the low oil price – economy

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Consumers are happy about cheap fuel prices at petrol stations. But the dangers of low quotes are serious.

When some oil prices turned negative at the beginning of the week, many consumers had hopes: will they get money out of the gas pump when they fill up? Many probably already suspected that this was not to be expected – and were nevertheless happy about cheap fuel prices. What is far less known, however, is that low oil prices can have fatal consequences. An overview of the greatest dangers.

Problems in the financial system

Many US shale oil companies have not only pumped tons of oil in recent years, but have also inflated themselves with debt. The fracking companies have raised a lot of money on the US bond market, and the volume of energy bonds has quadrupled in the past decade. US banks have also granted energy companies several hundred billion dollars in loans. However, with collapsing prices, it is no longer profitable for many of the oil companies to extract the raw material at all – which is what the company’s financiers care about. “Small oil companies in particular are under threat,” says Michael Dei-Michei from Wiener Energieberatung JBC Energy.

Problems in the oil sector are likely to affect US regional banks, among others, which have been heavily involved in loans. At some of these regional institutes, every tenth dollar of credit went to energy companies. Banking experts are cautiously warning against being fooled by the “regional bank” label. In the worst case, the imbalance of an institution could already cause a cascade effect in the financial system. The situation on the bond market looks more relaxed: there, the oil and gas companies only have to repay a small portion of the bonds at least this year.

High deflationary pressure

Decreasing prices? That sounds great to many consumers. Because then, in the future, a lot will become cheaper. Anyone who waits a month to buy the washing machine will receive an automatic discount. But that can have disastrous consequences for the economy as a whole: because if prices fall, many buyers delay procurement and continue to stall the economy. Financial experts are therefore concerned about the extremely low oil prices, which are having a major impact on the price level. Already in March, prices in the euro zone only rose by 0.7 percent, in February they had climbed by 1.2 percent. Above all, the fall in the oil price eased some of the wallets – and worries financial experts: “We consider this crisis to be a brutal deflationary shock for the markets,” the fund company Carmignac noted in an investor letter. It is unclear whether the current pressure on prices will ultimately grow into a longer-term deflationary spiral. In the past, experts were quite often wrong with their price forecasts.

Geopolitical faults

The oil price is perhaps the most political of all prices – and has often been a geostrategic match in the past. Oil prices like this have never been so low in this millennium and this puts petro-states such as Saudi Arabia and Russia under enormous pressure: the Saudis actually need an oil price of $ 86.5 to balance their national budgets. Now citizens could face severe cuts in social benefits that would test the loyalty of the population to the regime. “For both Saudi Arabia and Russia, the deep fall in the oil price is economically painful and politically associated with considerable risks,” say strategists from the Science and Politics Foundation. In plain language: Some rulers might want to distract from the domestic situation with foreign policy maneuvers. However, US President Trump also caught the eye on Wednesday afternoon: he threatened that his navy could destroy Iranian gunboats if the Iranians harassed American ships. After his tweet, oil prices picked up.

Cheap oil is harmful to the climate

The corona virus not only makes climate demonstrations impossible, it also pushes the debate about climate protection into the background. The fact that the oil price collapsed as a result of the Corona standstill is now likely to directly damage the climate, at least in some respects. “When it comes to cars and heating systems, fewer people are now thinking about climate-friendly technologies,” says energy economist Claudia Kemfert from the German Institute for Economic Research. Because climate-friendly technologies are sometimes more expensive – and consumers are particularly looking at prices in the current economic situation. But such purchases would have fatal long-term effects, since consumers often use heaters and cars for many years. However, it is not to be expected that the cheap oil price will lead to significantly more car trips or holiday flights. On the one hand, this seems unlikely due to the corona measures. On the other hand, the oil price has rarely influenced the desire to travel in the past.

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Corona: Banks want looser rules for state aid – economy

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The EU Commission could exploit the legal leeway very flexibly to hold taxpayers liable again in an emergency.

It is becoming apparent that the great promise made by the governments from the financial crisis that they will never again bank banks clinging to taxpayers’ money could not be kept in the corona crisis. According to the Süddeutsche Zeitung Individual financial institutions, but also governments, are urging to loosen the strict conditions for government aid as a precautionary measure and at the same time to soften the directive on winding down clumsy banks.

If they were successful with this, taxpayers would have to assume the losses from banking business again. As early as March, when the corona virus was spreading almost unchecked in Europe, the EU Commission had announced that it was examining “whether it will be necessary to make the rules for state financial injections more flexible for banks”. This test is reported to be in full swing. In essence, the EU state aid law should serve as a door opener, where the EU Commission has great discretion.

“Under no circumstances should there be a blank check for state aid to the banks, nor does the state aid law give it away at all,” says Sven Giegold, MEP of the Greens. It cannot be ruled out that in the event of a worsening of the corona crisis, a state would also have to help banks in individual cases. “But that always has to be checked specifically.” Banks in Italy and Greece in particular are considered to be extremely vulnerable to crises. To this day, their balance sheets contain bad loans in the billions, which date back to before the financial crisis. Most recently, the ECB therefore discussed the establishment of a bad bank where these contaminated sites could be disposed of.

Further government aid to banks would break the political promise of the 2008/2009 financial crisis. In Germany, the rescue of German banks at the time has cost taxpayers around 68 billion euros. This includes sufficient guarantees, loans and capital injections. Chancellor Angela Merkel (CDU) had promised at the time that it should never repeat that losses from banking transactions had to be socialized. On request, the European Commission and the federal government announced on Wednesday that they were opposed to a change in the rules that had been adopted at the time for the resolution of tight banks.

“The Federal Ministry of Finance is strictly against the softening of the directive,” said a spokesman for Federal Minister of Finance Olaf Scholz (SPD). The European Commission also said that it had “no intention” of touching the rules on bank resolution. The banks are in much better shape today than they were then and have “sufficient liquidity buffers,” said a spokesman for the authority. Nevertheless, he conceded that the corona crisis could hit the banks “indirectly”.

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In Germany, too, there are fears that the foreseeable wave of bankruptcies among companies, but also the failure of home loans, could put many banks in trouble in the medium term. The concerns of the banks about large-scale loan defaults go so far that the financial institutions had refused to take on only a small part of the default liability for certain companies in the state-secured KfW loans. The state stepped in because they refused. In these cases, German taxpayers are now fully liable if house banks pass on loans from the KfW state development bank to their customers. It is piquant that the house banks collect three percent interest from the needy companies that want to save themselves from bankruptcy with the quick loans.

At the same time, the federal, state and local governments are busy supporting domestic banks. It was only in 2019 that the Federal Ministry of Finance encouraged Deutsche Bank and Commerzbank to consider a merger. Both banks had tried for years to develop a viable business model. The balance of the financial crisis is “devastating”, according to the board of the “Citizens Movement Financial Turn”, Gerhard Schick. It is now visible how much the citizens were burdened. “A family of four paid more than 3000 euros for the bankrupt banks.”

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Abertis to pay € 875 million to ACS and Atlantia despite the fall in toll road traffic (Àlex Font Manté)

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Neither the widespread collapse of car traffic nor the uncertainty caused by the coronavirus have prevented Abertis’ shareholders from approving a dividend of € 875 million, the third highest dividend in its history. The concessionaire therefore has plans to pay generously to its shareholders, which are now basically two: Florentino Pérez’s ACS group and Atlantia’s Italian group. Just over 1% of equity is still held by small shareholders.

As the company has historically done, dividend payments will be split in two parts, one in April and one in November. The first half of the € 875 million will be paid next week, while the second half will be delivered in November.

Before paying the latter half, the board will make sure that the dividend does not penalize the note given by rating agencies to Abertis, as this would force it to pay higher interest rates on its debt, ‘company in a statement. In the same text, the company has “thanked the support” of its shareholders for the “flexibility” they have shown in dividing the dividend into two halves.

Who will pay for the traffic decrease?

The widespread confinement caused by covid-19 has plummeted the influx of cars on the toll roads of France and Spain, the two countries that offer the most business to Abertis today.
The drop was particularly bloody during the days when only workers in the essential sectors were allowed to move: during Easter, for example, the number of vehicles passing the Spanish Abertis toll roads dropped by 84%. In the case of France (where Abertis controls Sanef, the country’s largest concessionaire), the drop was almost identical, with 82%.

84%

Decline in traffic on the Spanish Abertis toll roads during Easter

It is not clear who will have to pay the bill for this traffic decline. The last time Spanish motorway traffic dropped sharply, during the last crisis, Abertis demanded a compensation of 3 billion euros from the state because the car inflow levels were not reached provided for in the AP-7 concession contract. The matter ended up in the Supreme Court, which made a surprising decision: until 2021, when the last concession of the AP-7 expires, it would not say who was right.

Since the Supreme Court did not rule, we do not know now whether Abertis will have the right to claim compensation from the traffic slowdown that is being recorded in the state in recent weeks.

The opa raised the debt

Abertis, among the large Catalan companies, has the highest debt compared to its ebitda (profit before taxes and other concepts), as revealed in an article published on Saturday in the ARA. Specifically, while most large companies are not offended by this, Abertis currently has debt over six times its ebitda.

One of the reasons for these records is that their current owners (ACS and Atlantia) have repaid much of the debt they incurred to pay the cost of buying the company.


Atlantia and ACS pay Abertis half the price

Atlantia and ACS pay Abertis half the price

To remain the concessionaire, ACS and Atlantia signed a bank loan of 9,824 million. Most of this money (6.5 billion) will be returned to banks with a bill payable by Abertis: on the one hand, 3.5 billion will be obtained through debt issuance of the concessionaire, while another, another 3,000 have been directly charged to the Catalan company in the form of long-term debt.

The remainder of the loan was paid off with the sale of investee companies, such as Cellnex or Hispasat.

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The key is tax fraud

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One of the meanings of tax fraud defines it as “the illicit activity that people or companies incur when they hide property or income from the tax authorities, or overestimate the deductible concepts, with the aim of paying less taxes than they legally owe” (Wikipedia) . By their very nature, it is impossible to calculate the amount of tax fraud in a country or territory, but what can be done are estimates. In fact, it is estimated that in Spain, in terms of GDP, tax fraud ranges from 6% to 9%.

For 2019, tax fraud amounted to between € 74,685 and € 112,028 million. So that we can understand the magnitude of these figures, Spain closed its public accounts last year with a negative balance of € 27 billion, and in terms of interest on public debt, it paid close to € 32 billion. This means that, in the theoretical assumption that in 2019 tax fraud would have been zero, Spain would have ended the year with a surplus, and with the difference it could have paid the interest on its debt.

The magnitude of the fraud

In any case, to understand the extent of tax fraud it is necessary to contemplate a sufficiently long chronological series and, in addition, it must be done with real values, that is, eliminating the reducing effect that inflation has. Thus, with euros from the year 2000, tax fraud in Spain between 2000 and 2019 (both included) reached a figure ranging from 1.54 to 2.32 trillion euros. These figures are six and nine times the GDP of Catalonia last year.

Things could look differently if in the current economic downturn we are in, Spain could have half of this figure that is disappointed every year, don’t you think?

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young graduates 2020, new “sacrificed generation”

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About 700,000 young people under the age of 25 will have a more than chaotic entry into the labor market this year.

Students from the National University of El Salvador pose with their diplomas on April 6, 2020.
Students from the National University of El Salvador pose with their diplomas on April 6, 2020. JOSE CABEZAS / REUTERS

Entering the job market in the midst of a crisis is no easy task. And young graduates from 1993, or more recently from 2008, are well placed to know this. These generations who finished their education at the worst of the recession were faced with a particularly complicated arrival in employment. During the financial crisis of the late 2000s, the unemployment rate of young entrants (1 to 4 years of experience), for example, jumped 3.1 points between 2007 and 2011, three times that of more workers ten years of experience. And there is every reason to believe that, given the violence of the crisis, the young graduates of 2020 will have everything from a new “sacrificed generation”. In their turn.

“During periods of severe recession, newcomers to the job market are the main victims of the consequences of crises. There is not only an impact on their rate of access to employment but also on the amount of their wages upon hiring. These consequences

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