The worst of the economic crisis unleashed by the COVID-19 pandemic is likely over, European Central Bank (ECB) President Christine Lagarde said yesterday, but added that the new normal would look different from what was before.
“We probably have passed the lowest point. I say that with some trepidation because, of course, there could a severe second wave if we learn anything from the Spanish Flu,” she told an online conference.
“We are not going to return to the ‘status quo.’ It’s going to be different. The recovery is going to be incomplete and transformational,” she said.
The hardest hit industries — such as airlines, hospitality and entertainment — will emerge from the crisis “in a different shape,” while new sectors might arise, she said.
The recovery would also be at different paces.
“It’s going to be a continent at a time,” Lagarde said.
The IMF predicted in its latest forecasts on Wednesday that the world economy would contract by 4.9 percent this year, before growing 5.4 percent next year.
By region, the contraction is most dramatic for the eurozone, which is set to see the economy shrink 10.2 percent.
China, in contrast, could yet post growth of 1 percent for this year, the IMF said.
Lagarde, a former IMF chief, said she believed central banks have been playing their part to mitigate the damage.
“The central banks I think have responded massively, diligently to the challenge and we will continue to do so,” she said.
PRICE STABILITY
“Call it whatever it takes, call it using all the levers... The mandate is the same — our mandate is price stability,” she said.
However, while central banks have in the past complained about being asked to do the heavy lifting while governments keep their coffers tightly shut, Lagarde said that this time “what is very special is that for once, monetary policies and fiscal polices worked hand in hand.”
In Europe, Germany has taken the lead in digging deep into its treasury, unleashing more than 1 trillion euros (US$1.12 trillion) of aid to shore up the economy.
German Chancellor Angela Merkel and French President Emmanuel Macron have also sketched out the backbone of the 750 million euros fund proposed by European Commission President Ursula von der Leyen to bolster the bloc’s economy.
The move blasts through Germany’s traditional fierce opposition to “subsidize” other member state outgoings, as it would include grants — with no repayment obligation — to those hardest hit by the crisis.
However, the plan is still being debated in Brussels, with the so-called “frugal” countries, such as Austria and the Netherlands, leading the opposition.
VITAL INVESTMENTS
Lagarde said the recovery money had to be used wisely, and stressed the importance of investing in digital and green projects in Europe.
“I hope those two backbones of investment plans will survive the negotiation process that always happens in Brussels,” Lagarde said.
However, she added that a deal would likely not emerge by the next EU summit on July 17 and 18.
China has claimed a breakthrough in developing homegrown chipmaking equipment, an important step in overcoming US sanctions designed to thwart Beijing’s semiconductor goals. State-linked organizations are advised to use a new laser-based immersion lithography machine with a resolution of 65 nanometers or better, the Chinese Ministry of Industry and Information Technology (MIIT) said in an announcement this month. Although the note does not specify the supplier, the spec marks a significant step up from the previous most advanced indigenous equipment — developed by Shanghai Micro Electronics Equipment Group Co (SMEE, 上海微電子) — which stood at about 90 nanometers. MIIT’s claimed advances last
ISSUES: Gogoro has been struggling with ballooning losses and was recently embroiled in alleged subsidy fraud, using Chinese-made components instead of locally made parts Gogoro Inc (睿能創意), the nation’s biggest electric scooter maker, yesterday said that its chairman and CEO Horace Luke (陸學森) has resigned amid chronic losses and probes into the company’s alleged involvement in subsidy fraud. The board of directors nominated Reuntex Group (潤泰集團) general counsel Tamon Tseng (曾夢達) as the company’s new chairman, Gogoro said in a statement. Ruentex is Gogoro’s biggest stakeholder. Gogoro Taiwan general manager Henry Chiang (姜家煒) is to serve as acting CEO during the interim period, the statement said. Luke’s departure came as a bombshell yesterday. As a company founder, he has played a key role in pushing for the
EUROPE ON HOLD: Among a flurry of announcements, Intel said it would postpone new factories in Germany and Poland, but remains committed to its US expansion Intel Corp chief executive officer Pat Gelsinger has landed Amazon.com Inc’s Amazon Web Services (AWS) as a customer for the company’s manufacturing business, potentially bringing work to new plants under construction in the US and boosting his efforts to turn around the embattled chipmaker. Intel and AWS are to coinvest in a custom semiconductor for artificial intelligence computing — what is known as a fabric chip — in a “multiyear, multibillion-dollar framework,” Intel said in a statement on Monday. The work would rely on Intel’s 18A process, an advanced chipmaking technology. Intel shares rose more than 8 percent in late trading after the
GLOBAL ECONOMY: Policymakers have a choice of a small 25 basis-point cut or a bold cut of 50 basis points, which would help the labor market, but might reignite inflation The US Federal Reserve is gearing up to announce its first interest rate cut in more than four years on Wednesday, with policymakers expected to debate how big a move to make less than two months before the US presidential election. Senior officials at the US central bank including Fed Chairman Jerome Powell have in recent weeks indicated that a rate cut is coming this month, as inflation eases toward the bank’s long-term target of two percent, and the labor market continues to cool. The Fed, which has a dual mandate from the US Congress to act independently to ensure