The Swiss government is set to announce the next stages of its plan to slowly unwind its coronavirus restrictions and rekindle its beleaguered economy.
The Federal Council meets Wednesday to map out a lockdown exit strategy for everything from sports and cultural activities to tourism, restaurants, and big events such as conferences. Talks on when to reopen Swiss borders and ease bans on gatherings of more than five people are also on the agenda.
“What awaits us next week is an extremely important menu to face the next stages,” Interior Minister Alain Berset said last Wednesday.
Swiss officials are also expected to announce an aid package worth about CHF 1.5 billion for Lufthansa unit Swiss and CHF 500 million for other companies in the industry, Tages-Anzeiger reported on Tuesday. The package, promised several weeks ago, is said to consist mainly of state guarantees for bank loans.
The government has already scheduled three phases of the transition to normality, or at least a semblance of it. The first began this week with the reopening of a few businesses, including hairdressers, garden centers, and hardware stores.
If the infection remains under control, children can go back to school and more shops will reopen on May 11. Institutions of higher education, museums, zoos, and libraries will have to wait until June 8.
What happens next is the big question. Officials are weighing risk factors, such as the increase in social contact and the ability of businesses to protect people, against the economic benefits.
After six weeks in limbo, Switzerland is headed for its deepest downturn since 1975 in the aftermath of the oil price shock, according to the State Secretariat for Economic Affairs, or SECO. It is forecasting a slump of 6.7 percent for the year, followed by a gradual rebound in 2021.
The jobless rate shot up in April even as the government began helping companies cover the costs of keeping workers on their payrolls to avoid mass layoffs. Unemployment will probably reach 3.4 percent by the end of April, up from 2.9 percent in March, said Boris Zürcher, head of SECO’s labor department.
Governments across the globe are rolling out rescue packages for their ailing airlines as the travel slump drags on. The International Air Transport Association has warned that the pandemic could bankrupt half the world’s airlines.
Lufthansa is pressing Angela Merkel’s coalition for a multibillion-euro bailout that doesn’t involve ceding control to the German government. European rival Air France-KLM last week received pledges of 11 billion euros in loans and guarantees from the French and Dutch governments.
Eric Jakob of SECO warned on Monday that residents of Switzerland shouldn’t plan to travel internationally before 2021. Jakob said that even if air travel starts up again, it would remain uncertain for a long time.
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COVID-19 may tip world into financial crisis, UN warns
The world is vulnerable to a financial crisis if the coronavirus epidemic drags on because it is already so deep in debt, the United Nation’s trade body warned in a report on Monday. An enduring health emergency will likely trigger margin calls, tighten borrowing conditions, and increase the risk of a stampede to sell assets not hit in the first round of market turmoil, the UN Conference on Trade and Development said. “This raises the prospect of a credit crunch in a period of high indebtedness,” despite very low interest rates, the report says. Hopes of a recovery will hinge on sustained and coordinated liquidity injections by central banks, more active fiscal policies, and renewed efforts to bolster trade. “Central banks should do whatever it takes in the face of the COVID-19, including directing credit for production and employment,” UNCTAD said. The world has been on a borrowing binge since the 2008 meltdown, when central banks pumped vast sums into cash-strapped markets and banks to shore up the system. At the start of 2020, total debt stocks exceeded more than $250 trillion, about three times global gross domestic product, according to the Institute of International Finance. Developing countries most at risk Developing countries are particularly vulnerable to a credit crunch, as many are already struggling with the highest debt levels on record. “For many developing countries that are facing debt distress already, I think we’re going to have to look at more radical solutions,” Richard Kozul-Wright, who oversees globalization and development strategies at UNCTAD, said in an interview Monday with CNNMoney’s Kasmira Jefford. “The need for a moratorium on debt servicing in some countries will also be necessary.” Economists have warned for years that such massive debt is a risk for the global economy. Record-low interest rates in countries around the globe have made it easier and cheaper for corporates, individuals, and governments to borrow. Last week, the U.S. Federal Reserve, which cut rates three times last year, slashed them by half a percentage point in response to the economic threat from COVID-19. The European Central Bank meets this week, and markets are pricing in a much smaller cut, given that rates are already in negative territory. There is also speculation that the ECB is preparing measures to provide liquidity to businesses hit by the outbreak.
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