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Early movers: #UAE and #Australia begin economic stimulus as world scrambles 

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The outbreak of coronavirus has had repercussions far beyond public health. Effects are now being felt on the global markets as social distance restriction begins to restrict international commerce, writes Lisa Moore.

Communities are also feeling the impact as businesses begin closing operations to slow the spread of the virus. In the United States, for instance, many major retailers, from Glossier to Patagonia, have taken the unprecedented move to indefinitely shut their doors to prevent the spread of coronavirus.

It is specifically this ‘grassroots’ impact on businesses that economists are most concerned about. With the shutting down of major cultural events such as sports games and music festivals, and business conferences like Facebook's F8 and Apple’s annual Worldwide Developers Conference, ordinary workers at those firms and their suppliers have felt the brunt.

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The closure of schools will also substantially affect economies. When schools start sending kids home, their parents are taken out of the workforce with an additional burden being placed on those parents who are casual workers, single parents or small business owners. While some will be able to work from home or take paid leave, most parents will have no choice but to forfeit income at the expense of looking after children. Creating particular concern in theUS, school closures of 12 weeks are predicted to reduce the national GDP by 1%.

This underscores the biggest concern that economists share - the stability of the Small to Medium-size Enterprise (SME) sector, the economic staple of most free-market countries.

The sharp - albeit transitory - decline in business activity and the huge strain it puts on workers and business owners, raises the obvious question to world leaders: What can governments do to soften the blow and ensure markets survive public health measures?

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However, unpredictable and drastic events like the COVID-19 pandemic  throw governments into such a state of panic that economic concerns are often not addressed until it is too late.

Italy for instance, having entered a state of total nation-wide lockdown, has all but abandoned economic considerations. With over 30,000 cases, Rome is more concerned about containing the epidemic than maintaining business flow. With the country’s markets essentially at a standstill, the eyes of the world are now on Italy to observe how a modern Western economy will bear an almost-total shutdown.

But while some governments are struggling to contain the virus, others are implementing early measures to ensure economies stay afloat, with the UAE and Australia being some of the first movers.

While both these nations have seen business slowdowns in the wake of the pandemic, the Emirati and Australian governments have wasted no time gathering and deploying resources to both workers and business owners.

For Australia, its Treasury has begun a US$10.3 billion economic stimulus package program to support low-income workers. According to official reports, as many as 6.5 million workers and 3.5 million businesses would be supported by the effort. First to be activated will be a direct $750 payment to low-income earners as well as seniors and veterans. Additionally, a 'Boost Cash Flow' fund of $6.7 billion has been set up to deliver payments of up to $25,000 to SMEs, with another $1.3bn set aside for business owners to continue paying their employees and trainees.

Showing financial prudence but also an awareness of the imminent economic threat, Australian PM Scott Morrison announced that “measures are all temporary, targeted and proportionate to the challenge we face. Our actions will ensure we respond to the immediate challenges we face and help Australia bounce back stronger on the other side, without undermining the structural integrity of the Budget.”

The UAE has also gone full throttle to ensure its economy can weather pandemic. The government recently unveiled a $27bn stimulus package. According to regional media sources, the money will go mostly toward supporting the Emirate’s vital industries like banking and tourism. With eyes on UAE small businesses, authorities have also taken major steps to ease the burden on owners and support their operations. The Emirates have canceled the 25% down payment required for requesting installment-based payment of government fees for obtaining and renewing licenses. This will ease the burden on SMEs considerably. The Abu Dhabi Executive Council has also ordered a $1.3 billion fund to be dispersed to pay for utilities in workplaces with another $800 million going towards credit guarantees to support SME operations.

Other countries have also followed suit in deploying plans to uphold their economies.

Saudi Arabia’s central bank has begun the dispersal of a $13.3bn package to support private businesses. Egypt’s government has allocated 100 billion pounds ($6.4 billion) to combat the economic effects of coronavirus.

Asian nations have also followed the trend, with Japan announcing a $4bn aid package.

The most striking example of government-backed economic support came recently from Washington. The United States federal government is planning a $1 trillion package to help American workers and businesses get through the economic impact of coronavirus. Secretary of the Treasury Steven Mnuchin told reporters that the government needs to “move swiftly and boldly in a major way to help American small businesses survive this disruption and thrive on the other side of it. In particular, we are preparing bold steps to ensure that Main Street can access liquidity and credit during this extraordinary time." Among other steps, the package would include direct cash grants of $1,000 to households with the aim of increasing cash flow in the economy.

The fight against corona requires decisive and early action. We know that early and aggressive health policies can slow the contagion. Perhaps the UAE and Australia will also teach us the importance of early economic intervention too. As former Italian Prime Minister Matteo Renzi told media "Italy is now paying for mistakes made in the early days of the outbreak. Please don't make the same mistakes of under-evaluation of the risk", he said.

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Commission approves €1.8 million Latvian scheme to support cattle farmers affected by the coronavirus outbreak

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The European Commission has approved a €1.8 million Latvian scheme to support farmers active in the cattle-breeding sector affected by the coronavirus outbreak. The scheme was approved under the State Aid Temporary Framework. Under the scheme, the aid will take the form of direct grants. The measure aims at mitigating the liquidity shortages that the beneficiaries are facing and at addressing part of the losses they incurred due to the coronavirus outbreak and the restrictive measures that the Latvian government had to implement to limit the spread of the virus. The Commission found that the scheme is in line with the conditions of the Temporary Framework.

In particular, the aid (i) will not exceed €225,000 per beneficiary; and (ii) will be granted no later than 31 December 2021. The Commission concluded that the measure is necessary, appropriate and proportionate to remedy a serious disturbance in the economy of a member state, in line with Article 107(3)(b) TFEU and the conditions set out in the Temporary Framework. On this basis, the Commission approved the scheme under EU state aid rules. More information on the Temporary Framework and other actions taken by the Commission to address the economic impact of the coronavirus pandemic can be found here. The non-confidential version of the decision will be made available under the case number SA.64541 in the state aid register on the Commission's competition website once any confidentiality issues have been resolved.

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Commission approves €500,000 Portuguese scheme to further support the passenger transport sector in Azores in the context of the coronavirus outbreak

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The European Commission has approved a €500,000 Portuguese scheme to further support the passenger transport sector in the Region of the Azores in the context of the coronavirus outbreak. The measure was approved under the State Aid Temporary Framework. It follows another Portuguese scheme to support the passenger transport sector in Azores that the Commission approved on 4 June 2021 (SA.63010). Under the new scheme, the aid will take the form of direct grants. The measure will be open to collective passenger transport companies of all sizes active in the Azores. The purpose of the measure is to mitigate the sudden liquidity shortages that these companies are facing and to address losses incurred over 2021 due to the coronavirus outbreak and the restrictive measures that the government had to implement to limit the spread of the virus.

The Commission found that the Portuguese scheme is in line with the conditions set out in the Temporary Framework. In particular, the aid (i) will not exceed €1.8 million per company; and (ii) will be granted no later than 31 December 2021. The Commission concluded that the measure is necessary, appropriate and proportionate to remedy a serious disturbance in the economy of a member state, in line with Article 107(3)(b) TFEU and the conditions of the Temporary Framework. On this basis, the Commission approved the measure under EU state aid rules. More information on the Temporary Framework and other actions taken by the Commission to address the economic impact of the coronavirus pandemic can be found here. The non-confidential version of the decision will be made available under the case number SA.64599 in the state aid register on the Commission's competition website once any confidentiality issues have been resolved.

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Commission authorizes French aid scheme of €3 billion to support, through loans and equity investments, companies affected by the coronavirus pandemic

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The European Commission has cleared, under EU state aid rules, France's plans to set up a € 3 billion fund that will invest through debt instruments and equity and hybrid instruments in companies affected by the pandemic. The measure was authorized under the Temporary State Aid Framework. The scheme will be implemented through a fund, titled 'Transition Fund for Businesses Affected by the COVID-19 Pandemic', with a budget of € 3bn.

Under this scheme, support will take the form of (i) subordinated or participating loans; and (ii) recapitalization measures, in particular hybrid capital instruments and non-voting preferred shares. The measure is open to companies established in France and present in all sectors (except the financial sector), which were viable before the coronavirus pandemic and which have demonstrated the long-term viability of their economic model. Between 50 and 100 companies are expected to benefit from this scheme. The Commission considered that the measures complied with the conditions set out in the temporary framework.

The Commission concluded that the measure was necessary, appropriate and proportionate to remedy a serious disturbance in the economy of France, in accordance with Article 107 (3) (b) TFEU and the conditions set out in the temporary supervision. On this basis, the Commission authorized these schemes under EU state aid rules.

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Executive Vice President Margrethe Vestager (pictured), competition policy, said: “This €3bn recapitalization scheme will allow France to support companies affected by the coronavirus pandemic by facilitating their access funding in these difficult times. We continue to work closely with member states to find practical solutions to mitigate the economic impact of the coronavirus pandemic while respecting EU regulations.”

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