World faces potential new ‘Great Depression’ as virus toll mounts

Global bodies warn of catastrophic economic fallout from pandemic, with Italy’s leader suggesting future of EU is at stake

Pedestrians are reflected in a quotation board of the Tokyo Stock Exchange in Tokyo on April 8, 2020. (Kazuhiro NOGI / AFP)
Pedestrians are reflected in a quotation board of the Tokyo Stock Exchange in Tokyo on April 8, 2020. (Kazuhiro NOGI / AFP)

BRUSSELS, Belgium — World powers scrambled on Thursday to build a global response to the human tragedy and once-in-a-century economic collapse caused by the coronavirus epidemic, as death tolls in the US and Europe soared higher.

In a locked-down New York, the UN Security Council was to meet on the pandemic for the first time. And, by video conference, EU finance ministers were wrangling over how to bail out their worst hit members Italy and Spain.

“We anticipate the worst economic fallout since the Great Depression,” said IMF chief Kristalina Georgieva, warning that all but a handful of countries will see incomes fall and urging governments to provide “lifelines” to businesses and households alike.

The US Federal Reserve tossed out just such a rescue to Americans, with chairman Jerome Powell announcing financing facilities of $2.3 trillion “to provide as much relief and stability as we can during this period of constrained economic activity.”

He warned, however, that the US economy is moving “with alarming speed” toward “very high unemployment.”

Another 6.6 million US workers filed for unemployment benefits last week, new data showed Thursday, meaning that nearly 17 million workers have lost their jobs since mid-March.

In this file photo a view of the New York Stock Exchange is seen on Wall Street on March 23, 2020 in New York City. (Angela Weiss / AFP)

Alongside the personal tragedies and the pressure on overburdened hospitals, there has been a stark economic toll, with the World Trade Organization warning of the “worst recession of our lifetimes.”

Madrid and Rome are seeking assistance from EU partners to rebuild their economies in the wake of the disaster, but Germany has rejected the idea of joint borrowing and the Netherlands is blocking a compromise solution.

EU finance ministers were to meet later Thursday by videoconference for the second late-night crisis talks of the week to try to agree terms to allow hard-hit members to access funds.

“If we do not seize the opportunity to put new life into the European project, the risk of failure is real,” Italian prime minister Giuseppe Conte told the BBC, suggesting the very future of the EU was at stake.

Christine Lagarde, the head of the European Central Bank, said it was vital the ministers hatch a plan big enough to meet the challenge, warning: “If not all countries are cured, the others will suffer.”

European companies are also suffering under a public lockdown, which health experts say is vital to slow the virus’ spread but has effectively frozen economic life.

In one example, German airline Lufthansa warned it was losing one million euros ($1.08 million) an hour and would need state aid.

A commuter walks at the deserted Gare de Lyon train station on April 9, 2020 in Paris on the 24th day of a lockdown in France aimed at curbing the spread of the COVID-19 disease. (STEPHANE DE SAKUTIN / AFP)

The coronavirus slump has also exacerbated the instability in world energy markets, and on Thursday top oil producers from OPEC like Saudi Arabia and its OPEC+ partners, including Russia, met to discuss cutting production to boost prices.

The virus has traveled around the whole world, and confined more than a third of humanity to their homes, but there has been a marked lack of international solidarity. Thursday’s videoconference meeting of the UN Security Council will be the first on the crisis since it began.

Led by Germany, nine of the council’s 10 non-permanent members requested the closed-door meeting last week, fed up with the body’s inaction over the unprecedented global crisis.

Talks are moving forward, diplomats said, and Washington is no longer insisting UN statements refer to the virus as coming from China, which had infuriated Beijing.

The pandemic is marching into areas previously only lightly affected. Africa faces vast economic damage, with the World Bank warning that sub-Saharan Africa could slip into its first recession in a quarter of a century.

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