S&P 500 futures are up as the global economy continues to recover, and countries push for an easing of coronavirus-related lockouts. President Trump is expected to sign an executive order today, lifting liability protections for Facebook and Twitter. Chinese Premier Li Keqiang said the country is not interested in a Cold War with the US, and it is in the world’s best interest for the two to cooperate. The White House is reportedly considering scrapping a special tariff on Hong Kong, while Secretary of State Mike Pompeo said it was no longer independent.
The European Commission has unveiled a plan for an $826 billion stimulus package, but Republicans in the White House and Senate are warming up for additional stimulus legislation.
The timing is perfect: the prospect of additional stimulus legislation once again dominates the headlines. Efforts to relaunch the economy should improve growth prospects for the future, and the timing of the announcement coincides with the start of a new round of economic stimulus.
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People want to get back to business as usual, and economies everywhere are starting to open up again, and they want their jobs and their lives back.
Euro Stimulus Plan
Yesterday, the European Commission presented a plan to support regional economies, and the introduction of measures to support credit flows could contribute to the recovery.
He also said that the European Union took the steps in April, such as the creation of a European Stability Mechanism, which would lead to more spending in the first year of recovery than in any other period in recent history. The $826 billion stimulus package includes more than $1.5 trillion in spending over the next five years. It is called the “European Economic Recovery Instrument” and intends to introduce an additional $2.2 billion in tax incentives for investment in regional economies.
The only goal is to get the economy back on its feet and promote sustainable and resilient growth. The European Commission intends to launch the plan in time to limit the additional economic damage caused by the coronavirus pandemic.
The Commission said its task was to help member states whose needs were greater than ours. One of the central tenants of this package is that it will help countries with the highest economic and social vulnerability, such as Greece, Spain, Italy, and Portugal.
In Europe, this means that the countries with the highest debt levels, such as Greece, Spain, Italy, and Portugal, are likely to benefit the most. According to the International Monetary Fund, Greece’s debt-to-GDP ratio is 181%; Spain 98%; Italy 131%); Portugal 125%; and Italy and Spain 132%. Their debt-to-GDP rates are the highest in the world, and countries in this region of the European Union are among the most indebted.
We can, therefore, see that the situation in the North is very different from that in the South and vice versa. Conversely, the European Union as a whole stands at 83%, but the debt-to-GDP ratio in Greece, Spain, Italy, and Portugal stands at 132%.
The European Commission hopes to reverse this trend by putting forward plans to support these vulnerable states. Back then, it took a while for weak economies to feel the effects of the rescue effort. European economies took eight years to recover from their pre-financial crisis peaks, and it took three years for the investment to do the same.
Unemployment in Greece and Spain has risen by 2.5 percent and 3.2 percent, respectively, and significant increases have also been recorded in Italy and Portugal.
The European Commission is also trying to learn from the events of the financial crisis, and interest rates are returning to the economy.
The Fed and Congress Additional Stimulus
The Federal Reserve and Congress see the impact of the financial crisis on the US economy and the economy in general. We are likely to see an increase in interest rates and a return to normality for the US economy in the coming months.
The European Union has adopted a new set of rules for its financial sector and the European Central Bank. We expect a broader and more stable recovery, helping those who struggled the last time, such as the US and Europe.
Republicans in the White House and Senate are preparing another round of stimulus programs, and US Treasury Secretary Timothy Geithner recently declared that the government is interested in repaying unemployment benefits.
There would be no replacement for the soon-to-expire unemployment benefit, but the current legislation raises it to $600 a week. In addition to the wages that people would earn, $450 a week is mentioned, and there would also be a replacement of $1.5 billion a year in tax cuts for businesses.
This has raised eyebrows among employers who complain that it encourages workers not to return to work and could lead to an increase in redundancies.
As a result, Senate Republicans are looking for a replacement, and Senate Majority Leader Mitch McConnell has said additional legislation is not far off. Republicans began discussing the possibility of a coronavirus-related stimulus package last week. Earlier, House Speaker John Boehner of Ohio, the top Republican on the Senate Finance Committee, said his leadership wanted to give more time to feel the impact.
McConnell’s Senate colleagues are also enthusiastic about the idea, and Politico recently reported that Republican contacts in Washington said a bill could be passed early next month. The consensus is that the law should be debated and passed before the current measure; the payroll tax plan expires at the end of June. This is at odds with the autumn elections, particularly in a contest seen as a battleground.
Treasury Secretary Steven Mnuchin has also raised the possibility of additional stimulus measures. He said the government would like to spend more money, but there is no consensus on whether it would be necessary. This is important as he is responsible for negotiating the latest economic recovery package.
The Democratic-controlled House of Representatives passed a $3 trillion stimulus bill to kick start the debate. Under the Democrats’ plan, most of the aid money will be distributed to states and municipalities that are suffering revenue shortages due to the coronavirus and the associated shutdown. According to a source familiar with the negotiations, if both sides can agree on a stimulus package, it could come in the form of a $1.5 trillion package for the federal government and $500 billion for states and local governments. Senate Majority Leader Harry Reid and House Speaker John Boehner are expected to oversee further talks.
The US Chamber of Commerce, the country’s largest business group, has told its members that it believes the current economic environment is the worst it will experience since the downturn. Similar comments were made by the Federal Reserve Bank of New York and the National Association of Realtors.
Businesses everywhere are slowly but surely trying to get back on track, and some states are now putting forward plans to revive their economies.
The first round of legislation is intended to bridge the gap as the country tries to contain the coronavirus spread. If this game plan succeeds, it should be a good sign for global growth prospects, and the next round could boost growth when the economy restarts.
The United States and the European Union are the world’s two largest economies, so a recovery here, together with a revival, should help drive economic recovery across the planet. The Euro Stoxx should continue to drive the S & P 500, Dow Jones Industrial Average, and other major US indexes.
Market Events Today
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Initial Jobless, Continuing Claims (8:30 a.m.)
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Kansas City Fed Manufacturing Index for May (11 a.m.)