“Details of Italy’s [mortgage holiday] scheme remain hazy… For one thing, its banks are already stuffed full of bad loans and can ill-afford a permanent blow to profits. For another, helicopter drops would have to be underwritten by the ECB. The chances of it doing so are remote.
“That said, for the rest of Europe Italy is a country that is too big to fail. So what’s really at stake is not whether Italian GDP contracts by 1.5% or 4.5% in the second quarter but whether its financial crisis proves contagious. As it might.
“Charles Dumas, of TS Lombard, says: “The banking system is unlikely to be able to remain solvent or liquid in the current conditions of nationwide lockdown. The tourist industry is effectively dead for 2020.
“Fiscal stimulus could be counterproductive if, as is possible, investors demand a much wider credit spread to accept fresh Italian paper. Italy will need massive support from eurozone partners to avoid going the way of Greece.””
“Over the past three weeks, stocks in Europe have plunged by 22.5%, their worst decline since the collapse of Lehman Brothers.
“The sell-off has been across the board but the worst of it has been reserved for the banking sector, whose shares have been relentlessly crushed and re-crushed for 13 years.”
https://wolfstreet.com/2020/03/10/european-bank-stocks-collapse-to-march-2009-1988-levels/
“Europe’s airports are facing an unprecedented financial crisis due to the outbreak of the coronavirus on the continent.
“The Airports Council International, the global trade representative of the world’s airport authorities, said European airports are facing a ‘full blown crisis’ and have called on governments to only issue travel bans as a last resort.”
“The Bank of England cut its key interest rate to 0.25 percent on Wednesday and announced a raft of other measures to bolster Britain’s economy…
“against disruption caused by the coronavirus outbreak.”
“Christine Lagarde said Europe risks a major economic shock similar to the financial crisis unless leaders act urgently on the coronavirus…”
“Norway risks sinking into a recession for the first time since the financial crisis of 2008, after a collapse in oil prices added to the fallout of the coronavirus.
“The government of western Europe’s biggest petroleum producer, which is also the richest Nordic economy, is preparing emergency stimulus measures…”
https://finance.yahoo.com/news/richest-nordic-economy-now-faces-142932926.html
“A potent mix of sharply lower oil prices and the coronavirus outbreak has left the Canadian economy bracing for a downturn…
“Some Canadian oil producers saw their values erode by more than 50 per cent in an instant.”
“Sources are signaling that President Trump could push for federal funds to assist oil and natural gas producers affected by a steep decline in global oil prices, The Washington Post reported Tuesday.
“Shale companies were hammered on Monday as the price for oil suffered the sharpest one-day drop in almost 30 years.”
“The coronavirus is threatening to expose the Achilles heel of the U.S. economy: heavily leveraged companies.
“As the economic expansion stretched into a record 11th year, and interest rates stayed at ultralow levels, business debt ballooned and now exceeds that of households for the first time since 1991.”
“Accustomed to running at full speed this time of year, George Powers has watched as a shipping slowdown tied to the coronavirus sidelines more than half his warehouse workers…
“Such is the situation at some of the biggest ports in the US and across the world as the Covid-19 outbreak cancels dozens of cargo sailings, and some dock and warehouse workers are being sent home…”
““Stagflation would be a disaster. People are dismissing it as an old threat from the ’70s that won’t happen again, but you could see it come back,” said Nancy Davis, chief investment officer of Quadratic Capital Management and portfolio manager of the Quadratic Interest Rate Volatility and Inflation Hedge ETF “
https://edition.cnn.com/2020/03/10/investing/stagflation-economy-coronavirus/index.html
“The problem today, however, is a sudden stop in production, which monetary policy can do little to offset.
“Fed chair Jerome Powell can’t reopen factories shuttered by quarantine, whatever Donald Trump may think. Likewise, monetary policy will not get shoppers back to the malls or travellers back onto airplanes, insofar as their concerns centre on safety, not cost.”
“The big issue is what happens if the virus persists into UK and US markets and default rates on the debt increase.
“Governments will potentially not only be dealing with a virus affecting public health but another contagion effect in financial debt markets in which investors start panicking about whether debts will be repaid and start demanding repayments.”
“Jesse Colombo, an economic forecaster and columnist who identified a housing and credit bubble in the US prior to the 2008 crash, says a number of new bubbles in markets around the world are set to burst.
““We are already very late in the cycle, and coronavirus is basically the one-two punch. But we were already hurtling towards recession before anyone ever heard of coronavirus,” he told The Independent.”
“The conflict over oil production between Saudi Arabia and Russia this weekend has sent oil prices plummeting and comes on the heels of growing worries about the spread of coronavirus.
“This marks the first time the global economy has been buffeted by simultaneous supply shocks. The two are related.”
https://thehill.com/opinion/finance/486872-a-tipping-point-for-the-global-economy
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