States could receive more coronavirus aid as riots cause more damage to economy

Growing bipartisan support for addition stimulus after weekend rioting: Gasparino

Sources tell FOX Business’ Charlie Gasparino an additional stimulus, largely skewed to state governments, could be approved before summer recess.

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Significant bipartisan support has emerged in Congress for another round of stimulus, including a chunk of money in the form of aid to state and local governments following a weekend of rioting and looting in more than 140 cities across the country, FOX Business has learned.

The official tally of damage to businesses, property and the US economy has yet to be determined. The riots — which were sparked when an unarmed black man, George Floyd, was killed during an arrest, leading to a murder charge against a white police officer — come on top of a sharp economic slowdown attributed to the coronavirus pandemic.

US JOBS MARKET SHOWS EARLY SIGNS OF CORONAVIRUS RECOVERY, GOLDMAN SAYS

The economic impact of the business lockdowns that followed the spread of the virus has led to a sharp rise in unemployment, causing severe state and local budget shortfalls. Even before the unrest, Democratic House Speaker Nancy Pelosi had called for a government stimulus bill of as much as $1 trillion to be earmarked for states and cities, a move initially rebuffed by Republican Senate Majority Leader Mitch McConnell, who took the position that Pelosi's plan would bail out profligate state governments such as Illinois, which was in fiscal duress long before the pandemic hit. McConnell has also said he was hesitant to spend more money before the complete implementation of the previous stimulus bill, including the so-called Main Street Lending Program, a $600 billion plan in which the Federal Reserve can make loans to small and midsize businesses.

But the weekend's rioting, which continued through Monday as members of Congress returned to work following the Memorial Day break, has some Republicans in private conversations with business lobbyists and others conceding that a new stimulus package is likely necessary. Business lobbyists tell FOX Business that based on their conversations, the plan could include significant money directed to state governments that are suffering from the double whammy of business lockdowns and now massive costs associated with large-scale social unrest.

Those costs include everything from overtime for police, the fleeing of people and their tax dollars from large cities, to businesses struggling to reopen as the coronavirus death tally has risen above 100,000. Precise details of the next stimulus remain unclear but congressional sources say broad contours are emerging, including likely aid to states and cities of as much as $650 billion.

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Congressional sources say McConnell hasn’t agreed on any new stimulus plan and could once again reject money going to states. But the mood to aid states is growing so much following the rioting that on Monday, after business lobbyists spoke with congressional aides, the message they received was that money to states would likely be coming. These lobbyists said they believed the state bailout package, if enacted, would also have "few strings attached.” That means states like Illinois will be able to use the money to fund its pension coffers, which McConnell and GOP officials had warned against, one person with knowledge of these conversations told Fox Business.

Press officials for McConnell and Pelosi didn't return telephone calls or emails for comment.

In an interview with National Public Radio on Friday, McConnell said this next phase of stimulus will be the “fourth and final stimulus” and likely won’t be passed until July. But congressional sources and lobbyists also tell FOX Business the violence unleashed across America this weekend will likely hasten legislation.

McConnell, in exchange for the government aid, could demand a business liability waiver, shielding businesses from COVID 19-related lawsuits when they reopen as many are now, these people add. Democrats may also seek another round of stimulus checks for individuals and families, said another Wall Street lobbyist who regularly consults with members of Congress.

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The new stimulus plan comes after three previous rounds, costing taxpayers trillions of dollars. The Federal Reserve has also pumped an estimated $10 trillion into the economy that has halted and largely reversed the stock market’s precipitous decline even if it hasn't yet stopped the broader economy's collapse.

The nation's unemployment rate is expected to reach 20 percent this week — levels not seen since the Great Depression. The riots and the destruction they've caused to small businesses could push joblessness even higher, business leaders say.

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Congress could extend small business loan forgiveness timeline to 12 weeks, Mnuchin says

Mnuchin: CARES Act has poured $3T into economy

Treasury Secretary Steven Mnuchin highlights the Main Street Lending Program and the overall impact the CARES Act has had on small businesses throughout the United States.

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Lawmakers could extend the time frame for small businesses to spend the coronavirus aid they received through the $660 billion Paycheck Protection Program, Treasury Secretary Steven Mnuchin said Thursday.

"One of the things we are working with Congress on, and there is bipartisan support, is lengthening the eight-week period," Mnuchin said during an interview with The Hill. "There is bipartisan support to extend that to 10 or 12 weeks … That's definitely something we want to fix."

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Mnuchin acknowledged that some restaurant groups have asked for the timeframe to be extended to 24 weeks.

The Senate is considering legislation that would double the amount of time businesses have to spend the money to 16 weeks, and House Democrats are expected to bring a similar bill to the floor next week.

In a video posted to Twitter this week, Sen. Marco Rubio, chairman of the Senate Small Business Committee, said Senate Republicans are trying to pass a stand-alone bill to extend the PPP loan. The Florida Republican said he expected the bill to receive "99 or 98 votes."

DESPITE PPP LOANS, SOME SMALL BUSINESSES ARE CHOOSING TO STAY CLOSED – HERE'S WHY

“We are going to change PPP so that if you got a PPP loan, you have 12 or 14 or 16 weeks to spend the money on payroll,” Rubio said. “Still the same purpose, just some more flexibility because the crisis has changed.”

Under the current rules, recipients of the government-backed aid must spend the money within eight weeks, meaning small business owners who received the earliest loans must spend the funds by May 29.

If at least 75 percent of the money goes toward maintaining payroll — including salary, health insurance, leave and severance pay — the federal government will forgive it.

WILL YOU GET A SECOND STIMULUS CHECK? HERE'S WHAT WE KNOW

The remaining 25 percent can be spent on operating costs like rent and utilities, but may not go toward mortgage principal or pre-payments. Money spent on nonqualifying expenses must be repaid at an annual rate of 1 percent within two years. No payments are required during the first six months.

Although some advocacy groups have pushed for the 75 percent requirement to either be changed or eliminated entirely, arguing that it could hurt tens of thousands of borrowers who cannot meet the threshold, Mnuchin defended the restriction.

"It's called the Paycheck Protection Program, it's not called the overhead protection program," he said.

As of Monday night, about 4.3 million loans worth more than $513 billion had been distributed, leaving roughly $97 billion left in the pot.

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McDonald's Stock Could Offer Profitable Short Sales

Dow component McDonald's Corporation (MCD) is showing signs of weakness after a six-week bounce into resistance and could sell off in coming sessions, offering timely short sales for skilled market players. Better yet, the lack of progress above March's three-year low has barely affected depressed accumulation readings, raising the odds that the decline will retrace a good portion of the bounce, potentially reaching a test of that deep support level.

The recovery wave into April stalled at 50-day exponential moving average (EMA) resistance in the mid-$180s, which was broken on heavy volume in February. The uptick has also failed to reach 200-day EMA resistance in the mid-$190s, broken during the same downdraft. Taken together, it's possible that Mickey D's stock has entered a secular decline that will eventually break the first quarter low and reach deeper support near $100.

Restaurant sector headwinds have been well documented, with the coronavirus pandemic forcing closures and/or take-out alternatives around the world. States and countries are slowing resuming dine-in services, but social distancing requirements will reduce capacity and sales, affecting years of growing profits. In addition, McDonald's has to deal with complex real estate issues, with 85% of restaurants owned by franchisees through mandatory lease-back arrangements.

This is a two-edged sword, with the company benefiting from a massive real estate portfolio that adds to income in good times. However, these aren't good times, and real estate prices could slump badly in the next year or two, with millions out of work and unable to pay their bills. In turn, franchisees may be stuck in leases at expensive properties that are losing value at the same time the restaurant industry is trying to recover.

MCD Long-Term Chart (2010 – 2020)

The stock broke out to new highs in 2010, entering a strong uptrend that stalled just above $100 in 2012. Multiple rally attempts failed into the second half of 2015 when the all-day breakfast initiative caught fire, yielding a breakout that attracted widespread buying interest. Bullish price action carved a graceful series of higher highs and higher lows into 2019, culminating with August's all-time high at $221.93.

A pullback into November got bought, ahead of a slow-motion uptick that accelerated at the start of 2020. However, the rally reversed at a lower high, completing a double top breakdown in February. The subsequent downdraft cut through support at the 2018 and 2019 lows before ending at $124, the lowest low since February 2017. The monthly stochastic oscillator lifted into a buy cycle just ahead of the January peak and kept that bullish status during the 94-point sell-off, highlighting the contrary nature of current price action.

MCD Short-Term Chart (2017 – 2020)

The decline stretched though the .618 Fibonacci retracement of the 2012 to 2019 uptrend and bounced, reaching the .618 sell-off retracement and 50-day EMA during the first week of April. That level has also narrowly aligned with resistance at the double top breakdown and .236 retracement of the uptrend. The stock has now dropped to a four-week low, but don't look for a strong sell signal until it breaks the April 15 low and tries to fill the April 6 gap.

The on-balance volume (OBV) accumulation-distribution indicator topped out in April 2018 and tested that level when price posted August 2019's all-time high. The effort failed, but buying pressure cleared the barrier in January 2020, setting the stage for even stronger gains. However, buyers then headed for the exits, triggering the second failure in two years. OBV is now drifting lower and could test the 2019 and 2020 lows in coming weeks.

The Bottom Line

McDonald's stock could resume its downtrend at any time, rewarding well-timed short sales.

Disclosure: The author held no positions in the aforementioned securities at the time of publication.

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Coronavirus could kill livelihoods of almost half the global workforce: ILO

Some 1.6 billion workers making up nearly half of the global workforce could lose their livelihoods to the coronavirus crisis, international officials warn.

Those at-risk workers have jobs in the “informal economy” that won’t pay them if they get sick or stay home amid widespread lockdowns aimed at controlling the deadly virus, according to the International Labor Organization.

The group known as the ILO expects earnings to plunge 60 percent in the first month of the crisis for the world’s 2 billion informal workers. They have poor access to health care and benefits like sick leave, making them the most vulnerable of the world’s 3.3 billion workers, officials say.

“As the pandemic and the jobs crisis evolve, the need to protect the most vulnerable becomes even more urgent,” ILO director-general Guy Ryder said in a Wednesday statement. “For millions of workers, no income means no food, no security and no future.”

The ILO predicted that the coronavirus will have an even deeper impact on the global labor market than previously thought with roughly two thirds of the world’s workers living in countries where workplaces have been required or recommended to close.

The group expects total working hours to plunge by 10.5 percent in the second quarter of this year, which is equivalent to 305 million full-time jobs. That’s worse than the 6.7 percent drop the ILO previously predicted and more than double the 4.5 percent decline estimated for first quarter.

And about 436 million businesses and self-employed workers in hard-hit industries face “high risks of serious disruption,” including 232 million in wholesale and retail and 111 million in manufacturing, the ILO said in a Wednesday report.

“The eventual increase in global unemployment over 2020 will depend substantially on how the world economy fares in the second half of the year and how effectively policy measures will preserve existing jobs and boost labor demand once the recovery phase begins,” the report reads.

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Global auto output could fall by nearly 20 million in 2020: report

Coronavirus will force auto companies to rethink supply chains: Subaru of America CEO

Subaru of America CEO Tom Doll discusses the state of the auto industry, supply chain issues and its efforts to help feed America amid the coronavirus pandemic.

Global vehicle production is now expected to fall more than 20 percent to around 71 million in 2020 as a result of the COVID-19 pandemic and ensuing recession, a top automotive forecaster said Monday.

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That steep decline, far greater than anticipated earlier this year, likely will cost global automakers 19 million units in lost production in 2020, according to LMC Automotive, which warned those projections could slip further, depending on how quickly major regions recover.

FORD EXPECTS $2B QUARTERLY LOSS AFTER CORONAVIRUS FALLOUT

In North America, where most vehicle production remains shut down in April, automakers have been forced to delay introductions or planned ramp-ups of several new vehicles, including the Tesla Model Y, the Ford Mustang Mach E, and redesigned versions of Fiat Chrysler's Jeep Grand Cherokee and General Motors' full-size SUVs, LMC said.

Ticker Security Last Change Change %
TSLA TESLA INC. 746.36 -7.53 -1.00%
F FORD MOTOR COMPANY 4.98 -0.14 -2.73%
GM GENERAL MOTORS COMPANY 22.38 -0.10 -0.44%

The analyst said it expects vehicle sales will bottom out in April in North America and Europe, with post-pandemic recovery "unlikely to be rapid" in the coming months.

China, which was among the first countries hit by the novel coronavirus, already has restarted most of its auto plants and now expects to see a sales decline of just 12 percent this year, LMC said.

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Expectations for a swift economic recovery have plummeted as the virus has swept most of the globe, plunging all major regions into recession, according to researcher IHS Markit.

While the company expects to see the beginnings of an upturn by the end of the year, current projections "are likely to be revised down" as the pandemic plays out.

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Coronavirus could cause New York to ramp up audits of wealthy taxpayers

Coronavirus in New York won’t end anytime soon: Nurse

New York ICU nurse Howard Sandau discusses personal protective equipment and says there are still many critical patients who need ventilators in order to survive.

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As the coronavirus decimates New York’s budget – the virus hitting the state far harder than any other in the U.S. – experts are warning wealthy taxpayers that the Empire State is likely going to crack down on audits in an effort to recoup some of the revenue it is owed.

New York has always been “aggressive” when it comes to auditing individuals who claim to have moved to a new jurisdiction – and experts expected this year to be no different. However, it could be even more intense given the state’s fiscal situation.

“With expected revenue shortages I would think they’ll continue to use their audit enforcement efforts to make sure they’re collecting the right amount of revenue,” Timothy Noonan, state and local tax expert and partner at Hodgson Russ, told FOX Business.

WILL CORONAVIRUS CRISIS SPARK FRESH EXODUS FROM HIGH-TAX STATES?

The New York City Independent Budget Office estimates the Big Apple’s budget shortfall for fiscal 2020 and 2021 will come in at $9.7 billion, as the city sheds 475,000 jobs over the course of 12 months.

Piling onto revenue troubles is the fact that New York has also extended its tax-filing deadline until July 15, which means it will be waiting to collect from some taxpayers.

The state may turn to audits since it has one of the best systems in the country, Noonan said. It has also lost many residents to lower-tax, or income tax-free states, like Florida, throughout recent years – a trend that accelerated following the implementation of a $10,000 cap on state and local tax deductions.

And for people who changed their domicile in 2018 – as that cap went into effect – residency claims are coming up for audit, Noonan noted.

CORONAVIRUS HIT HIGH-TAX STATES RENEW SALT CAP REPEAL EFFORTS

However, Geoffrey Weinstein, special counsel in the Tax, Trusts & Estates Department of Cole Schotz, told FOX Business, that – at least over the near-term – auditors are dealing with their own unique challenges.

“The residency auditors from New York State … are working remotely from home and are not able to utilize in-office resources that are necessary to complete existing audits or commence new audits,” Weinstein said.

And for the current year, taxpayers changing their residence from New York have an extended period of time to file their non-resident or part-year resident returns, Weinstein added.

But, like Noonan, Weinstein does believe New York will eventually ramp up its auditing efforts.

“I suspect that New York will ultimately decide to double down on what has historically been a very lucrative residency audit program and will be vigorously pursuing those taxpayers that it believes are skirting their fair share of New York State/City taxes by having a second home in a non- or low-tax jurisdiction,” Weinstein added.

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The program has been particularly rewarding.

Between 2013 and 2017, New York State collected about $1 billion from residency audits, according to data from personal residency audit defense company Monaeo. During that timeframe, an average of about 3,000 non-residents were audited annually. Taxpayers are forced to cough up an average of $144,000 to New York as a result of residency audits.

And most people lost their cases – according to Monaeo 52 percent of people fail to convince auditors that they had moved.

As previously reported by FOX Business, concerns about the city’s tax revenues could be exacerbated further if more high-net-worth taxpayers decide to leave the city in the wake of the coronavirus outbreak. Experts have noted that frustrated taxpayers may choose to remain at their second homes or vacation homes instead of returning to densely populated areas of high-tax states, which have become a major source of concern amid efforts to mitigate the spread of the highly contagious virus.

Noonan said he has personally received multiple inquiries from clients about changing their domicile from New York to Florida during the coronavirus outbreak. The strategy is even more feasible for some taxpayers who may have gone to their vacation homes at the outset of the winter and have been unable to return – now racking up nearly enough days in Florida to make a case for a residency change.

Last year, New York Gov. Cuomo credited the SALT cap for contributing to a $2.3 billion budget deficit in the state as wealthy taxpayers left.

The Empire State lost $9.6 billion in 2018 alone as wealthy individuals and businesses moved out.

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Coronavirus unemployment could hit post-depression record, economists say

Labor secretary: 30% ‘overstates’ coronavirus unemployment rate

Labor Secretary Eugene Scalia on the coronavirus’s impact on the U.S. economy.

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Economists expect unemployment in the U.S. to surge to a post-Great Depression high as the coronavirus pandemic forces American life to come to a grinding halt.

Already, in the past three weeks, more than 16 million Americans — or about 10 percent of the workforce — have filed for unemployment benefits, stunning evidence of the economic calamity inflicted by the virus outbreak.

The unemployment rate climbed to 4.4 percent in March, according to Labor Department data that primarily reflected the early part of the month, before a majority of cities and states implemented strict stay-at-home policies, up from a half-century low of 3.5 percent in February.

Despite the unprecedented government fiscal relief effort, including a $2.2 trillion stimulus package, former Federal Reserve Chairwoman Janet Yellen, said this week the unemployment rate is now at least 13 percent, the highest since the 1940s. That would also exceed the 10 percent peak during the worst of the Great Recession more than a decade ago and top the previous post-World War II high of 10.8 percent in 1982.

HERE'S HOW EXPANDED UNEMPLOYMENT BENEFITS WORK

One of the nation’s top economists, Yellen predicted a 30 percent contraction of GDP this year, but has seen models as high as 50 percent.

“The internal dynamics inside the report are a sober, clear-eyed precursor to what is going to be the largest bloodletting in the labor market since the 1929 to 1933 period of the Great Depression,” Joe Brusuelas, chief economist at RSM, said after the release of the March jobs report last Friday.

Brusuelas added: “Despite Congress committing roughly 11.4 percent of gross domestic product in an attempt to mitigate the effects of shutting the economy down to limit the spread of the coronavirus, it is clear that it is not enough.”

MORTGAGE APPLICATIONS PLUMMETING

Estimates vary drastically for how high unemployment will eventually climb, but economists broadly agree that it will be grim. One particularly bleak forecast released by the St. Louis Federal Reserve predicted that up to 47 million jobs could disappear from the U.S. economy, bringing the jobless rate to a stunning 32 percent, exceeding the 24.9 percent peak during the Great Depression.

“These are very large numbers by historical standards, but this is a rather unique shock that is unlike any other experienced by the U.S. economy in the last 100 years,” the Fed researchers wrote.

The downturn seems the first since the 2008 financial crisis to be dubbed a recession by the National Bureau of Economic Research, which described it as a “significant decline in economic activity” that lasts more than a few months.

HOW TO FILE FOR UNEMPLOYMENT BENEFITS

Unemployment could take years to return to pre-coronavirus levels, according to a Bloomberg survey of economists. The economists projected that unemployment will fall gradually after peaking in the second quarter of 2020, but will only drop to 8.1 percent in the final three months of the year. Even in 2020, unemployment is expected to remain at 5.4 percent, well above the historic lows consistently seen prior to the pandemic.

“It will be a gradual re-opening of the economy, so a return to ‘business as usual’ is many months away. Throw in crippling financial losses and a legacy of defaults and it means we estimate U.S. economic output won’t return” to the late-2019 peak until mid-2022 at the earliest, James Knightley, chief international economist at ING Financial Markets, wrote.

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Health tech could suffer in COVID-19 capital crunch, investors warn

Investors warn Australian startups working on the forefront of medical research could be pushed to the brink as the coronavirus outbreak puts a squeeze on capital.

"Companies that move quickly now are likely to survive, but there will be lots of layoffs," said Chris Nave, managing director of biomedical investment firm Brandon Capital Partners.

Chris Nave, managing director of Brandon Capital, fears economic conditions will mean many Australian companies engaged in research will struggle to find runway to continue operations. Credit:Louie Douvis

Dr Nave warned the nation must have a plan for how it will support sectors including medtech and biotechnology in years to come as the industry faces tough conditions presented by the coronavirus pandemic.

This includes the fact that many clinical trials have paused in Australia, meaning businesses need to turn back to their investors to secure more capital to keep afloat, he said.

"I think that you'll see that particularly from high net worth investors, there will be a retreat from this speculative kind of investment," Dr Nave said.

"We will need to think about ways of protecting these companies, hopefully the CSLs and Cochlears of the future."

Earlier this week Australian peak body AusBiotech warned business support on offer from the government including the JobKeeper payment was not targeted at the biotech sector, where many companies were not generating revenue or had high cash burn rates.

"These pre-revenue companies house priceless talent and intellectual property that could be permanently lost to Australia if they are not able to weather the COVID-19 storm," chief executive Lorraine Chiroiu said on Tuesday.

Dr Nave agreed support measures so far did not directly address the challenges that research-intensive firms faced if forced to put their projects on hold.

He said his firm's portfolio companies had already made the decision to stand down staff to preserve their financial positions. While investment deals would still be made in 2020, the broader sector outlook was challenging.

"The government will need to think about programs that provide capital into the sector."

Chief executive of digital health company commercialisation body ANDHealth, Bronwyn Le Grice, said the crisis had brought into focus the importance of digital health tech, which was a "sleeping giant of the economy".

Chief executive of ANDHealth Bronwyn Le Grice believes investment conditions will be tough despite a renewed focus on health tech.

"But you can’t deny these economic shocks will reduce the amount of available capital," she said.

"The research and development community has to be significantly supported to ensure we don’t lose highly trained professionals [longer term]."

The future of the research and development tax incentive scheme remains unclear, with government plans for new caps on the program still on the table despite pushback from the startup community.

A Senate committee is still reviewing those changes, though is not set to report until August and in-person hearings have been postponed due to COVID-19.

Federal funding for biosciences research has been focused on fighting the coronavirus. Minister for Industry, Science and Technology Karen Andrews announced with Health Minister Greg Hunt last week that the CSIRO would receive a $220 million funding injection to upgrade its facility in Geelong to help fast-track infectious diseases research and work on a vaccine.

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Could the coronavirus end the vision of the European Project?

Could the coronavirus spell the end of the "European Project?”

In the aftermath of the global financial crisis the tensions between the vision of a more integrated Europe – a United States of Europe – and the reality of quite disparate economies and culture were stark.

Indeed, with "Grexit" and "Quitaly,” where both Greece and Italy teetered on the verge of quitting the eurozone, the project nearly fell apart.

The coronavirus is generating similar stresses. As with the GFC the pandemic has impacted the southern European countries far more than the northern states in the common currency union and, as was the case a decade or so ago, the Italians and Spaniards and their neighbouring states have far less fiscal flexibility to respond to it than countries such as Germany, the Netherlands and Austria.

As with the global financial crisis, the coronavirus has impacted sourthern Europe far more than the northern states.Credit:Bloomberg

Not surprisingly, therefore, southern Europe is pleading for help while the northern economies are only prepared to extend it with strings attached. For the second time in just over a decade the structural flaws in the eurozone and in the vision of a more deeply integrated Europe are being exposed.

Those flaws are encapsulated in the debate about coronabonds.

It’s not a new debate, just a rebadged one. In the wake of the GFC the same concept of the joint issuance of debt on behalf of all eurozone members was raised and squashed. Then the bonds were labelled “eurobonds".

In concept eurobonds might appear simple and compelling. Countries with a common currency would use a central agency to issue debt on behalf of all the 19 members of the eurozone, lowering the cost of debt for the weaker economies and in the process creating a much deeper and more liquid bond market, similar in size and nature to the US Treasury bond market.

The problem with that concept, however, is that the only thing the southern economies have in common with those in the north of Europe is their currency. Culturally and fiscally the Italians and Spaniards are very different to the Germans and Dutch.

There is also a fundamental structural barrier to mutualising the debt of the eurozone economies. The eurozone was created to help facilitate a European free-trade zone, as was the Schengen agreement that allowed borderless travel throughout the European Union.

It was never envisaged – and indeed was explicitly excluded from the EU’s charter – that the sovereignty of the member states would be compromised. Fiscal transfers – financial aid from one member state to another – were explicitly prohibited by the Maastricht Treaty in 1992 which created the EU.

There are some measures that were put in place in response to the GFC, such as the European Stability Mechanism, that would enable distressed economies to receive assistance, but they come with such harsh conditions attached (as Greece and Italy discovered) that they produce austerity and social distress.

At the heart of the differences over the issuance of coronabonds is a fear in the northern economies, noted for their financial discipline and, indeed, frugality, that they will effectively be subsidising (from the northerners’ perspective) their indolent, ill-disciplined and profligate southern European counterparts and relinquishing some elements of sovereignty in the process.

That’s why, while nine members of the eurozone, including France, have called for the creation of coronabonds the other 10, led by Germany and the Netherlands, have rejected that call. It’s also why the barriers to the completion of the European Project are so dense.

The northern European countries such as Germany are resisting calls to help out their southern counterparts.Credit:Getty

If Europe were to become the United States of Europe, it would need far more than a single currency and a free travel zone (or at least one that was borderless before the pandemic developed). It would need proper banking and fiscal unions, with a federal government responsible for the sovereign layer of debts.

The northern states don’t want that loss of sovereignty and the dilution of their economic superiority. They also worry about moral hazard – that a tighter union or even just the issuance of common debt instrument such as eurobonds or coronabonds would encourage the southern economies to be even more profligate and ill-disciplined because they would be bailed out and their debts pooled with and socialised by the northern economies.

Germany and the Netherlands and the other stronger economies in the eurozone do, of course, benefit from the inclusion of the weaker southern economies within the eurozone.

The presence of those more indebted and feeble economies produces a currency weaker than if, for instance, Germany was still issuing deutschmarks. German exports are significantly more competitive than they would otherwise be and its trade with the rest of the eurozone larger than it might otherwise be.

Spain and Italy and the rest of southern Europe, already heavily leveraged and with weak economic growth, have been hit harder by the pandemic than Germany, both in lives affected and lost and in economies heavily exposed to tourism. They will emerge far weaker from the experience than those economies to their north.

The nine members of the eurozone promoting coronabonds, including France (President Emmanuel Macron is a strong advocate for deeper European integration), could go it alone and create a southern European bond of their own. They are actively contemplating that option.

That might marginally lower the cost of debt but that’s about it. It would also take considerable time to put in place the agreements to underpin any issue – there are estimates that it would take several years, at least, to develop the legal framework for an issue of coronabonds.

If the southern Europeans feel they have been abandoned by their wealthier neighbours in a period of quite horrible distress they will again question the benefits of remaining within the eurozone, revisiting the debates around Grexit and Quitaly.

If they were to exit the eurozone, their currencies would depreciate considerably, creating more competitive economies (albeit while probably have to service euro-denominated and inflated debt) while those remaining within a diminished currency union would see the euro strengthen considerably and their competitiveness weakened.

Exits are unlikely. There’s ego – the euro brings prestige and geopolitical clout – to the European leaders and agencies and it would be a messy and costly business trying to extract an economy from the eurozone; messier than it was for the British, with their own currency, to exit the EU.

The ambition of the far deeper engagement by the promoters of the European Project, however, is going to be lost in the acrimony and finger-pointing occurring as the pleas for fiscal help in southern Europe are rejected by the north.

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Globalisation could run out of puff in post-coronavirus world

The coronavirus pandemic could upend globalisation by dismantling global supply chains as it accelerates trends like ecommerce, flexible employment arrangements and alters investor appetite for equities, according to Australian fund managers.

Hyperion chief investment officer Mark Arnold said globalisation could "absolutely" break down as travel bans and trade restrictions forced companies to re-examine distribution processes, the ongoing advances in robotics and potentially localise manufacturing.

"Having the whole world reliant on China for their supply chains was pretty stupid," he said. "As robotics get better and better, that will accelerate this trend to manufacture more in higher cost environments because you're close to the consumer."

Mark Arnold, the chief investment officer for Hyperion, says a post-coronavirus world will embrace technology and renewable energy.Credit:Glenn Hunt

Investors Mutual Limited senior portfolio manager Hugh Giddy agreed, saying while lower cost items like garments will likely remain offshore, 3D printing could be used to build electronics or medical prosthetics in Australia or America.

"In some cases it actually pays to be able to have a plant close to where the demand is rather than China or Vietnam," Mr Giddy said.

The comments come as the chief executive of the world's largest fund manager, Larry Fink, sent an email to shareholders this week warning the crisis would fundamentally reshape business and society.

Mr Arnold also said the post-coronavirus world would refocus the climate change debate and inspire global economies to switch towards renewable energy as major changes to normal operations had proved to have drastic impacts on pollution.

"Now that they can see the impact of switching off the economy for a period of time and how much pollution there was when things were operating as normal and how much cleaner it was when we flick that off," he said. "In the longer term, with this event will probably have the impact of forcing govenrments to actually move more quickly towards dealing with climate change."

The current disruption was likely to last six months which could speed up longer-term trends, including the decline of bricks and mortar retail and physical office spaces, according to Mr Arnold.

"In stable economic times, there's a lot of inertia and people just fall into habits of doing certain things," Mr Arnold said. "In times of a crisis, you're forced to change habits."

There would be less international travel, Mr Arnold said, and advances in technology meant employers would embrace alternative working arrangements which could have positive flow-on effects to both businesses and employees.

"It's good for business because they can save money and good for happiness levels for workers as well," he said. "A shorter commute or even a non-commute is one of the most important things in terms of happiness levels."

The vice chairman of Crestone, Clark Morgan, said there was no replacement for face to face meetings but the corporate world's newfound appreciation for working from home arrangements was good news for new parents.

"The idea that a mother with a young child might be able to work for two hours when the baby is asleep is great," Mr Morgan said. "Now every industry has been forced to participate flexible working hours, I think that could be a significant change in the way we view the whole structure of commercial operations and how we can get the best out of the workforce."

Investor appetite for risk was also changing, with the extreme market volatility shaking confidence globally. Mr Morgan said his clients have become more aware of their exposure to equities and have requested to further diversify portfolios.

"Many in the high net worth segment of the market considered themselves to be conservative investors but when you looked at their portfolios they were actually aggressive," he said. "They will turn to diversification."

Hyperion's deputy chief investment officer Jason Orthman said investors were looking to put money into companies with earnings growth and potential beyond the value of its share price and the coronavirus crisis would trigger a turn away from a "scatter gun" approach of index investing.

"The lightbulb should come on this time. It's been a lot more brutal than the GFC so investors might start changing the way they think about finding a collective of quality companies," Mr Orthman said.

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