The other coronavirus contagion concern

The other coronavirus contagion concern

As governments around the world put their countries on lockdown to slow the spread of the coronavirus, there is a growing fear that the global economy and financial system could soon experience another kind of contagion. This week, as the scope of the outbreak became clearer, dire economic data from China and forecasts of a looming global recession started rolling in. Some experts are even starting to use the dreaded D-word, drawing comparisons with the 1929 financial and economic crash that led to the Great Depression.


Coronavirus, and the responses to it, pose two major risks to the economy and financial system. The first is the hit to companies' sales and profits, and workers' wages and jobs. The worse the outbreak, and the harsher the social and economic clampdown needed to manage it, the worse the economic hit will be. Airlines are already warning they may face bankruptcy by May without government assistance. Carmakers and other large manufacturers are closing assembly lines. Millions of restaurant and other service industry workers that are forced into lockdowns may soon be out of jobs and unable to pay bills, student loans, and make rent or mortgage payments. That's one reason stocks have been hammered this week, despite attempts by the US Fed and other central banks to stem the bleeding and shore up confidence.

The second big risk is harder to pin down – that's the risk of financial contagion. Companies going bankrupt and firing workers is bad enough, but it can become an even worse problem if it creates a domino effect where companies can no longer pay back loans, generating losses that could shake confidence in banks and the broader financial system.

Offsetting the coming economic shock would reduce the risk of wider financial contagion, but will require governments around the world to unleash huge resources: both fiscal stimulus to help workers and companies (Italy has already suspended mortgage payments and declared a holiday on household bills, while President Trump has promised support for the airline industry and is now considering sending cash directly to Americans) – and possibly other measures to ensure the smooth operation of the financial system that go beyond what central banks have done to date.

The catch: Decisions about whom to bail out and whom not to will be every bit as politically fraught as they were in 2008-09, when governments around the world were forced to intervene to prevent a much worse collapse – and during a US election campaign, to boot. This time, though, the political wrangling will also take place during an ongoing pandemic that is already stretching many governments around the world to their limits.

This time last year, world health experts were speculating about why Africa appeared to have escaped the worst of the global pandemic. Younger populations? Natural immunity created by exposure to past viruses? Something else?

They can stop wondering. Africa is now in the grip of a COVID emergency.

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Get insights on the latest news in US politics from Jon Lieber, head of Eurasia Group's coverage of political and policy developments in Washington:

House Speaker Nancy Pelosi barred two Republican members from serving on the Jan. 6 commission. What's going on?

Well, the Jan. 6 commission was designed to be a bipartisan commission, taking input from members from Democrats and Republicans. House Minority Leader Kevin McCarthy had the opportunity to make recommendations but the Speaker of the House, Nancy Pelosi, could always veto those recommendations. In this case, she did, saying no to two members, Jim Banks and Jim Jordan, both of whom are strongly aligned with President Trump and who voted against certifying the election results in 2020. The Republicans for the most part see the Jan. 6 commission as an opportunity to score political points against them, and the Democrats say this is going to be a fair, non-biased, and nonpartisan investigation into what happened on Jan. 6, starting with a hearing next week with some of the police officers who were involved in the battle with the protesters inside the Capitol.

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In his New York Times op-ed, David Brooks says the US is facing an identity crisis — protecting liberal and progressive values at home while doing little to stop autocrats elsewhere. But has the US really abandoned its values abroad just because it's withdrawing from Afghanistan? Ian Bremmer and Eurasia Group analyst Charles Dunst take out the Red Pen to argue that the US can advance democracy without being the world's sheriff.

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When the Tokyo Olympics begin on Friday, Japan watchers will be following more than just the performance of Japan's star athletes, including tennis star Naomi Osaka. They will also be tracking the political fortunes of Prime Minister Yoshihide Suga, who is taking a big gamble by staging the event — amid a raging pandemic — in the face of strong and longstanding opposition from the Japanese public. What are the stakes for Suga, particularly with elections on the horizon? Eurasia Group senior analyst Ali Wyne explains.

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YouTube pulls Bolsonaro's rants: Google-owned YouTube pulled down a series of videos on the channel of Brazil's populist President Jair Bolsonaro, accusing him of spreading misinformation about the pandemic. YouTube removed more than a dozen clips for touting quack cures for coronavirus or claiming, in defiance of scientific experts, that masks don't reduce COVID transmissions. Last year, Twitter and Facebook also removed some content from Bolsonaro's feeds for similar reasons. But critics say that YouTube's move is too little too late, because Bolsonaro has been spreading misinformation about COVID since the pandemic began. Many Brazilians hold him personally responsible for the country's abysmal pandemic response, which has led to almost 550,000 deaths, the second worst toll in the world. Will YouTube's move change Bolsonaro's message? His weekly address to the nation, where he converses not only with government ministers but also various conspiracy theorists and loons, is broadcast on YouTube. Surely he doesn't want to risk losing that — or does he?

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Boycotts! Bans! Protests! Drugs! Think you've got gold medal knowledge about politics at the Olympics? Test what you know with this special Tokyo Olympics Quiz. And to stay current on all the latest political stories at the Games and around the world, subscribe here to Signal, our daily newsletter. Now, without further ado, the first question is...

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28: The UK and the EU have again failed to agree on post-Brexit trade rules for Northern Ireland, which is part of the United Kingdom. In a 28-page document, the British government had suggested further changes to trade rules that were already negotiated as part of the Brexit settlement, but Brussels was not having any of it.

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