WASHINGTON/BERLIN -- Major economies across the globe are preparing to unleash massive stimulus programs to combat the fallout from the coronavirus epidemic, with some packages on track to match or exceed 10% of gross domestic product.
The novel coronavirus has been confirmed to have infected more than 300,000 people worldwide and governments have responded by curtailing a wide range of social activities. Some are warning that the U.S. and European economies could see contractions in the second quarter in excess of 10% on the year.
In an effort to stave off a deep economic downturn, governments around the world are scrambling to put together record-level stimulus programs.
In the U.S., lawmakers are attempting to hammer out a record-breaking package, but partisan differences have so far stymied an agreement on the contents.
The size of the U.S. relief package will come to $2 trillion, a senior U.S. government official said, with expenditures falling between $1.3 trillion and $1.4 trillion. Liquidity from the Federal Reserve and elsewhere will account for the rest.
All told, "the package is coming in at about 10% of GDP," White House economic adviser Larry Kudlow told reporters Saturday. Nominal GDP stood at $21.7 trillion in the fourth quarter of last year, according to the Fed.
If the stimulus bill passes, it would easily eclipse the $700 billion package rolled out in the aftermath of the 2008 global economic crisis. But Republicans and Democrats remain split on the content of the stimulus, jeopardizing chances for it to pass on Monday as previously anticipated.
"From my standpoint, we're apart," House Speaker Nancy Pelosi told reporters Sunday. "We'll be introducing our own [Democratic] bill, and hopefully it will be compatible with what they discuss on the Senate side," she added.
Under prevailing proposals, small businesses would gain access to $300 billion in financing. Employers that successfully maintain payrolls and headcounts will be exempt from repaying parts of the loan.
Republicans seek $200 billion in rescue funds for the airline and hospitality industries, among other sectors. But Democratic Senate Minority Leader Chuck Schumer slammed that effort, saying that workers should be prioritized as well.
Stay-at-home orders and shutdowns of non-essential businesses will inevitably lead to an economic contraction. Washington plans to stimulate consumption by doling out cash stipends of up to $1,200 per qualifying adult. Some critics have said that money will end up going into savings.
The biggest focus remains on whether these measures will support cash flow at companies and save jobs.
Other countries are planning similar efforts. The U.K. announced a 30 billion pound ($35 billion) direct spending package, then unveiled 330 billion pounds in guaranteed loans for the business sector. The latter figure is equivalent to 15% of the country's GDP.
Germany will decide Monday on a 150 billion euro ($160 billion) emergency budget, essentially putting its balanced-budget commitments on the back burner. The cumulative number would jump to roughly 750 billion euros if corporate debt guarantees and other indirect funding measures are included, according to some estimates.
The Japanese government is due to announce an emergency spending package next month. Discussions have revolved around delivering a stimulus bigger than the one for the 2008 global economic crisis. The headline number back then amounted to 56.8 trillion yen ($512 billion at today's rates), including 15.4 trillion yen in actual government outlays. A package larger than that would be on a par with roughly 10% of Japan's GDP.
The Chinese government is reducing social insurance premiums for small, midsize and micro businesses for up to five months. State outlays will amount to 1.2 trillion yuan ($169 billion), according to a UBS estimate.
Depending on the trajectory the COVID-19 epidemic takes, national governments may be forced to commit to additional spending. But globally, public debt totals $70 trillion, up 3.5 times over two decades. If the rescue funds fail to swiftly cushion against an economic shock, the results would drive up interest rates and put financial markets in long-term flux.