Avoiding the economic deluge

Op-ed by Žikica Milošević

In the midst of the fighting against the coronavirus contagion, most of the countries have locked down, some of them completely. The small and medium enterprises, the sectors of tourism, service, restaurants, cafes and bars etc. Are among the most vulnerable, and of course the emerging economies. But also, in the developed economies, the travel industry, the car industry, the airline industry and many others are among the most stricken. Services are almost shut down, and the manufacturing is greatly diminished, since everybody mainly buys food and toilet paper, and the transport of parts is almost stopped, so the manufacturing industry is also almost stopped, So, the economic measures have to be taken right now. Not after.

(Photo by Hannelore Foerster/Getty Images)

Now in China the last day was marked by 46 new cases, 45 of them imported by Chinese students studying in Europe and the USA coming home after the school year is interrupted indefinitely. Only 1 case is transferred. The first train with the factory workers for Chinese automotive industry in Wuhan came to work, since there are no new cases in Wuhan, 11 million city, for 4 consecutive days. It seems that the first wave will be successfully suppressed in China. It is almost over. Now the economy should be recovered.

The economy has to be taken care of in parallel with the care of the contagion, otherwise we will have no-one and nothing to save. The Serbian PM Ana Brnabić and her crew should wake up from their dream in their ivory tower. When Christine Lagarde and Ursula von der Leyen could do, our government could. The EU woke up a little late and set aside €780 billion, with individual countries adopting measures similar to this one. The ECB is printing 1 thrillion euros as a help for the Eurozone economy, as a form of quantitative ease. Only after 88% of the Italians said they were dissatisfied with the EU and felt let down. Only after Serbian President Vučić announced that “the EU solidarity is just a mirage”, the EU allocated 7.5 million euros of help for Serbia. Better late than never.

Let us go further. Each person in Greece who loses their job will get 800 euros compensation per month. Donald Trump brings or announces measures that strongly resemble socialism: a thousand dollars per person for 6 months of guaranteed income, assistance and nationalisation of large companies… In Italy, the people and the companies do not have to pay taxes and communal bills until the end of the epidemics. Russia has allocated 300 billion rubles to fight the crisis. “Small and medium-sized businesses are most sensitive to economic turmoil and instability. The government has deferred payment of insurance, taxes, duties for various categories, including even renting space. What does it mean? That the state actually provided these companies with interest-free loans for a fixed period of time, enabling them not to spend their scarce resources” – says Mikhail Belyayev from Russian Institute for Strategic Research. For SMEs, with quarterly deferral of tax and insurance payments, lower-than-market interest rate lending programs are also envisaged, increasing the financial attractiveness of loan refinancing programs, and deferring payments for renting state and municipal premises. Authorities plan to control the situation in the labor market, especially in cities whose survival depends on only one factory or industry. There are also guarantees from the authorities that people will not lose their jobs and that wages will not be reduced. The similar measures have been taken in several other economies, like in Hungary.

The combination of meds, like the ones for AIDS, malaria (especially) and influenza have been approved in China, and Trump announced the use of it in the USA. It is running against the clock now, no time to test and approve it for 6 month. Cure now, test in the course of time. Trump is getting his points for the resolute behaviour. Because the death toll and the damages to economy will be too high if we do it all slowly.

Yesterday, the president of the Serbian Chamber of Commerce and a dozen presidents of mixed chambers of commerce (Serbian-German, Serbian-French, etc.) have signed an appeal for this to be done in Serbia too. It is not enough to “delay the bill and tax payments for retired people”, as announced, or to delay the credit installment repayments until the end of this. And it is absolutely not true that “no-one will go bankrupt for two month of not doing business”. The Serbian economy has to be helped immediately,

Wakey wakey. When we wake up, it could be economic desert.


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