Coronavirus Government Global Briefing: May 22


Welcome to Coronavirus Government Global Briefing, Mandarin Premium’s morning update on everything in local and global government responses to the COVID-19 outbreak.

Will the European Union’s fiscal response save or break ‘the European project’?

On Monday, German Chancellor Angela Merkel and French President Emmanuel Macron announced a refashioned proposal for the European Union to raise joint debt in supporting Europe’s hardest hit regions and industries throughout the crisis.

The plan, as The Sydney Morning Herald reports, to borrow €500 billion ($837 billion) from the financial markets under the EU name is similar to an early, rejected “coronabond” plan for hard hit southern nations — notably Italy and Spain, already suffering high debt levels following the global financial crisis and subsequent sovereign debt crisis  — to leverage the union’s shared balance sheet and decrease borrowing costs.

That first plan was condemned by Germany as well as a bloc of richer northern governments known as the “frugal four”: Denmark, Sweden, Austria and, perhaps most significantly, the Netherlands.

As POLITICO explores in a profile, Dutch finance minister Wopke Hoekstra has emerged throughout the crisis as Europe’s “bond villain”, slamming all efforts for debt mutualisation and insisting economic support through the European Stability Mechanism — a borrowing mechanism for eurozone countries in fiscal difficulty — be linked to specific economic conditions. Anyone familiar with what the EU put Greece through in terms of austerity measures will understand why Italy rejected that specific proposal.

For obvious reasons, Hoekstra’s diplomacy has not been well received, and while he is not alone — a now infamous video show Netherlands prime minister Mark Rutte laughing at calls not to bail out southern countries — leaders from Spain, Italy, France and Portugal have all argued that the future of the EU itself rests on workable relief packages.

What’s in the new deal?

However, under increasing pressure form southern nations, Merkel and Macron hoped the new plan will gain the necessary approval from all 27 members states with two major compromises:

  1. Funds would be distributed through the EU’s annual budget, creating new curbs on borrowing habits of some members; and
  2. Although backed by the annual financial contributions of member states, the €500 billion in new debt would not be counted on the balance sheets of any individual country.

Within 24 hours, finance ministers for Austria, Denmark and the Netherlands condemned the proposition in a joint videoconference, ahead of which Austria’s Gernot Blümel told POLITICO:

“We stand ready to provide the EU with further guarantees so it can provide more repayable loans to member states and businesses. What we cannot support — but what DE and FR propose — is that the EU borrows on the markets to finance non-repayable grants.”

As The Financial Times unpacks in a more holistic analysis of the situation, Sweden intends to co-operate with the “frugal four” and much of what happens next will be dependent on European Commission president Ursula von der Leyen’s full economic recovery package.

This will be presented 27 May, and will be reportedly increase EU spending by “a figure exceeding €1tn” when loans and grants are counted together.

Could all this lead to Italexit?

While German Finance Minister Olaf Scholz supports the new ‘Coronabond 2.0’ effort, he also argued in early April that the ESM could permit eurozone countries to borrow money without, “any unnecessary conditions attached, as that would be tantamount to a rerun of the austerity policy that followed the financial crisis and would lead to unequal treatment between individual member states.”

“For Italy, this would mean a fresh injection of 39 billion euros, and for Spain, 28 billion euros. They should be allowed to use this money for all necessary expenditures to fight the coronavirus. We don’t need a troika, inspectors, and a reform programme for each country drawn up by the Commission.”

However, increasing individual debt will invariably lead to some kind of reckoning with EU members down the line.

As progressive writers David Adler and Anton Jäger argue in the long-form mid-April London Review of Books piece ‘Oh, Mr Euro,’, even minor fiscal support stands to deepen “the chasm between Europe’s north and south” — they consider the far-right former deputy prime minister of Italy Matteo Salvini’s distrust of EU loans perfectly, worryingly, reasonable — while regions still recovering from a decade of austerity, and now COVID-19 and even a whiff of Austerity 2.0, will invariably see some kind of political pushback:

“The problem with papering over Europe’s economic wounds, however, is that the old ones haven’t healed. In 2012, a Merkel fudge compelled Greece to accept brutal austerity conditions and staved off the collapse of the eurozone. Germany always relied on a tacit ‘good cop, bad cop’ routine with the Netherlands, whose obsessive frugalism made fiscal extremists in Germany look like humanitarians. But the recovery measures they introduced in the last crisis barely staunched the bleeding: by 2019, youth unemployment in Italy, Spain and Greece was still more than 30%. COVID-19 has ripped off the plaster to reveal the carnage underneath. If Europe opts for another Merkel fudge, and Conte and Sánchez go along with it, then Salvini, Le Pen and their friends need only point at the wound and state the facts.”

Science wrap

  • A new Science study has found that rhesus macaques monkeys that had recovered from SARS-CoV-2 were protected against re-infection, although the duration of that protection is still to be determined.
  • Innovation Australia unpacks why, even with the Australian government now testing Apple and Google’s new framework for Contact tracing, COVIDSafe would have to be fundamentally altered in order to become compatible with it.
  • In ‘Ten reasons why immunity passports are a bad idea’, Nature’s Natalie Kofler and Françoise Baylis explain why, with countries either considering or introducing “immunity passports” for people who have recovered from the disease — i.e. Chile introducing “medical release certificates” with three months — the idea creates a “platform for restricting human rights, increasing discrimination and threatening — rather than protecting — public health”.
  • A very early-stage modelling study at The Lancet explores the cost–benefit comparisons of individual quarantine versus active monitoring of contacts.
  • In the tentative but fascinating Science article, ‘Why do some COVID-19 patients infect many others, whereas most don’t spread the virus at all?’, Kai Kupferschmidt explores the disease dispersion rate ‘k’ — which, distinct from the transmission rate ‘R’, gauges what proportion of people are responsible for overall spread. While estimates for SARS-CoV-2 still vary, ‘k’ appears to be relatively low — i.e. few people may be responsible for the most infections — and Kupferschmidt explores what then go into creating, and preventing, “superspreaders” i.e. space, time, temperature, noise etc.

New Zealand outlines $35m “financial resilience” scheme

Yesterday, New Zealand social development minister Carmel Sepuloni outlined a $35 million boost to Building Financial Capability (BFC) services to help residents manage money throughout the recovery.

 “We announced on Budget Day money was being invested in building financial capability service providers in support of demand for their services,” Sepuloni said. “We can now announce that $9.7 million will go towards a general funding top up of around 20% to the rate so BFC providers can continue to support the 35,000 clients they see each year.”

Additionally, the government announced an extra $25 million to be rolled out to 131 existing services for:

  • Financial Mentoring — one-to-one support empowering people to achieve their goals, including reducing debt and connecting to support they may need.
  • MoneyMates — peer-led support for people to learn and share together as a group.
  • Building Financial Capability Plus (Kahukura) service — intensive support for people who are hard to reach or with complex needs.
  • Micro-finance services — affordable credit to people at risk of unsustainable debt and hardship.”

State wrap

  • The Victorian government announced a virtual regional roundtable series, to be hosted by regional partnerships to understand local impacts of the pandemic.
    • The ABC reports that Victoria’s Year 12 students will sit their final exams in November and have results by the end of the year, following weeks of uncertainty.
    • Additionally, the government revealed that, as part of the new $500 million public and community housing fund, 12 new Aboriginal Housing Victoria houses will be built in Hampton Park and Dandenong, while $35 million will go to upgrade existing Aboriginal social housing.
  • Queensland has moved the state’s Ekka Show public holiday from Wednesday August 12 to Friday August 14 to create a one-year-only ‘People’s Long Weekend’ and provide stimulus for the tourism industry.
    • The government also announced that they have made more than 100,000 phone calls to seniors across the state to find out how they are going during the crisis, and ask if the Care Army can help.
  • The Northern Territory announced that local creative Rick Knight has been appointed Producer of Channel NT Virtual Territory, a new initiative to showcase NT artists and support the creation of accessible digital content as part of the $2 million Creative Industries Sector Immediate Response and Resilience Program.
  • The Western Australian government has established an urgent review of skills, training and workforce development in response to COVID-19, to be led by Anne Driscoll, Director General of the Department of Training and Workforce Development; Michelle Hoad, Managing Director, North Metropolitan TAFE; and Terry Durant, Managing Director, South Metropolitan TAFE.
  • The ACT government announced that Libraries ACT’s 20th ‘National Simultaneous Storytime’ will launch online at 11 am on Wednesday 27 May 2020.
  • Finally, in just a nice end to the week, the ABC reports that South Australia’s last remaining COVID-19 patient has left Royal Adelaide Hospital.

For health department updates: Federal, NSW, Victoria, QueenslandACTSouth AustraliaTasmaniaNorthern Territory and Western Australia.

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