Government Policy

  • 2020-07-10 07:30


    By Greg Quinn

    (MNI) - Governments must keep fiscal stimulus going through the recovery from the Covid-19 pandemic, while making hard choices about ending support for industries like airlines and fossil fuels facing a long-term reduction in demand, the IMF said Friday.

    "Fiscal policy will need to remain supportive and flexible until a safe and durable exit from the crisis is secured," Fiscal Affairs Director Vitor Gaspar and Research Director Gita Gopinath wrote in a blog post.

    "It will be necessary to facilitate the transfer of resources from sectors that may permanently shrink, such as air travel, to sectors that will be expanding, such as digital services. Support should move from maintaining jobs to supporting people as they retrain or relocate across sectors.

  • 2020-07-09 12:00


    By Greg Quinn and Brooke Migdon

    WASHINGTON (MNI) - Congress should extend fiscal stimulus as damage from Covid-19 lingers while the Federal Reserve should be ready with forward guidance and expanded QE if the economy weakens further, the OECD said Thursday.

    The banking system also faces risks if stimulus is withdrawn and there is a surge in bankruptcies from highly leveraged companies, the Paris-based group said in an annual review of the world's largest economy.

    "A sharp fiscal retrenchment would be counter-productive and as such the temporary provisions in the recent tax reform should not be allowed to expire. Furthermore, automatic stabilizers and additional measures implemented as part of the crisis reaction should be allowed to play out," the OECD report said.

  • 2020-07-08 09:34


    -Sunak Says New Measures Worth "Up to GBP30 billion" -Will Look At Debt-Interest Fiscal Rule "Keenly"

    LONDON (MNI) - Government stimulus for the hard-hit UK economy could total as much as GBP30 billion, some 1.5% of GDP, Chancellor Rishi Sunak said in his Summer Statement Wednesday, although the actual cost is likely to be markedly less.

    Sunak did not introduce any new fiscal rules in his speech but in response to a parliamentary question said he would look "keenly in coming months" at a debt-interest rule and pledged to return finances to a sustainable basis in the medium term.

    Debt-interest costs have fallen in line with lower interest rates, despite the surge in debt and, as MNI has reported, a debt-to-revenue measure is likely to be one of Sunak's f

  • 2020-07-02 10:56


    By Luke Heighton

    FRANKFURT (MNI) - Government efforts to counter the economic effects of the coronavirus pandemic must not be allowed to permanently alter the relationship between the state and private enterprise, the head of one of Germany's largest SME business associations told MNI in an interview, as he voiced concern that red tape might drag down growth.

    "A crisis is a time that transfers decision-making power to the government," Ludwig Veltmann, CEO of the Mittelstandsverbund, told MNI. "The danger is that if you are not careful it remains there, it becomes a sort of automatism.

  • 2020-06-24 09:00


    By Greg Quinn

    WASHINGTON (MNI) - The IMF reduced its 2020 global GDP forecast to -4.9% from -3% and said every region will contract for the first time ever as the Covid-19 pandemic continues adding damage to the deepest slump since the Great Depression.

    Output next year will only recover to around 2019 levels or 6.5pp less than what the IMF expected at the start of this year, according to a report Wednesday. Consumption has fallen far more than in other recessions, investment has tumbled, and a "catastrophic hit to the global labor market" will hobble the recovery.

    "Downside risks, however, remain significant," the Washington-based fund said, including a second wave of the virus that could reduce GDP another 4.9pp next year.

  • 2020-06-05 06:06


    --Championed Adoption Of Public Sector Net Wealth As Target Measure

    LONDON (MNI) - Richard Hughes, a former Director of Fiscal Policy at the Treasury and recently a leading researcher at the Resolution Foundation, has been picked to be the next head of the UK's Office for Budget Responsibility.

    Subject to approval by the Treasury Select Committee, he will take over in the autumn when current OBR head Robert Chote steps down.

    The appointment is seen as significant in part because Hughes has been a champion of the idea of targeting public sector net wealth rather than just focusing on debt or deficit measures as previous governments have done.

  • 2020-05-28 15:43


    By Ryan Hauser

    WASHINGTON (MNI) - The U.S. is unlikely to completely strip Hong Kong's special trade status amid China's effort to control the city, Derek Scissors, chief economist at China Beige Book and an American Enterprise Institute scholar, told MNI.

    Policy makers will seek deterrence over quick punishment, likely including the new Toomey-Van Hollen legislation calling for targeted sanctions, Scissors said in an interview Thursday.

    The U.S. will "seek to remove specific protections in order to allow sanctions against Chinese entities based and/or acting in Hong Kong," he said.

    China's recent security law "is another log on the fire, not gasoline," Scissors said.

  • 2020-05-28 13:53


    By Greg Quinn

    OTTAWA (MNI) - Mark Carney warned leaders from the UK, Germany, France and Canada at a UN conference Thursday not to remove stimulus too soon through the Covid-19 pandemic, and said traditional fiscal action is less powerful with households skittish about spending.

    "Countries will need to use all of their policy instruments," Carney told the conference. "We have to be careful not to withdraw that stimulus too soon as we saw shortly thereafter" the global financial crisis in 2009, he said.

    "Coming out of this crisis, some of traditional stimulus measures will be less effective than usual, think of income transfers or temporary tax cuts, because they will be dampened by heightened risk aversion" Carney said.

  • 2020-05-18 05:44


    By Luke Heighton

    FRANKFURT (MNI) - The ECB will increase its pandemic emergence purchasing programme if bonds spreads widen significantly, chief economist Philip Lane indicated Monday, as he pledged to put price stability ahead of the German Constitutional Court's concerns over monetary financing.

    Lane declined to say whether the euro zone economy has already met the criteria for the ECB's 'worst-case' scenario of a 12% fall in GDP growth in 2020, but he noted that, compared with March, economic activity in April had everywhere experienced a "deep fall," with a return to pre-crisis activity levels unlikely before 2021, "if not later."

    Here are key points from the interview with El Pais:

    - The ECB is a "goal-oriented institution," Lane explained, with PEPP's "exact

  • 2020-05-14 16:08


    By Evan Ryser

    WASHINGTON (MNI) - Fed Vice Chair Randal Quarles told a Congressional committee he isn't considering an emergency facility to support mortgage-backed securities, and downplayed the chance that further coronavirus waves will trigger a financial crisis.

    "We are not currently considering an additional facility," Quarles said before the House Financial Services Committee with regulators on Wednesday, that was taped and released on Thursday. The Fed's position on MBS lines up with the view Treasury Secretary Steven Mnuchin gave last month that he wasn't looking at a Fed facility.