07 Apr
EACC

Coronavirus: EU Commission mobilises €123 million for research and innovation to combat the threat of variants

The EU Commission is mobilising €123 million from Horizon Europe, the new EU research and innovation programme, for urgent research into coronavirus variants. This first emergency funding under Horizon Europe adds to a range of EU-funded research and innovation actions to fight the coronavirus and contributes to the Commission’s overall action to prevent, mitigate and respond to the impact of coronavirus variants, in line with the new European bio-defence preparedness plan HERA Incubator.
Mariya Gabriel, Commissioner for Innovation, Research, Culture, Education and Youth, said: “We continue to mobilise all means at our disposal to fight this pandemic and the challenges presented by coronavirus variants. We must use our combined strength to be prepared for the future, starting from the early detection of the variants to the organisation and coordination of clinical trials for new vaccines and treatments, while ensuring correct data collection and sharing at all stages.”
New calls for urgent research into coronavirus variants
The Commission launched new calls that complement earlier actions to develop treatments and vaccines by organising and conducting clinical trials to advance the development of promising therapeutics and vaccines against SARS-CoV-2/COVID-19. They will support the development of large scale, COVID-19 cohorts and networks beyond Europe’s borders, forging links with European initiatives, as well as reinforce the infrastructures needed to share data, expertise, research resources and expert services among researchers and research organisations.
The projects funded are expected to:

Establish new and/or build on existing large-scale, multi-centre and regional or multinational cohorts, including beyond Europe’s borders, which should rapidly advance the knowledge on SARS-CoV-2 and its emerging variants.
Further develop promising therapeutic or vaccine candidates against SARS-CoV-2/COVID-19, having already completed preclinical development in clinical studies.
Support research infrastructures to speed up data sharing and deliver fast research support and expertise, to confront the coronavirus variants and to be ready for future epidemics.

The successful consortia are expected to collaborate with other relevant initiatives and projects at national, regional, and international level to maximise synergies and complementarity and avoid duplication of the research efforts.
These emergency calls will tackle the short to medium-term threat and simultaneously prepare for the future. They will contribute to building the European Health Emergency Preparedness and Response Authority (HERA), which will enable the EU to anticipate and better tackle future pandemics.
The calls will open for submissions on 13 April and the deadline for submission is 6 May 2021. The new solutions need to be available and affordable for all, in line with the principles of the Coronavirus Global Response.
Background
In February 2021, Commission President Ursula von der Leyen announced the start of a European bio-defence preparedness plan HERA Incubator aimed at preparing Europe for an increased threat of coronavirus variants. The HERA Incubator will bring together science, industry and public authorities, and leverage all available resources to enable Europe to respond to this challenge.
Since the beginning of the crisis, but also since much earlier, the Commission has been at the forefront of supporting research and innovation and coordinating European and global research efforts, including preparedness for pandemics. It has pledged €1.4 billion to the Coronavirus Global Response, of which €1 billion comes from Horizon 2020, the previous EU research and innovation programme.
The new special calls announced today under Horizon Europe, the successor of Horizon 2020, complement these earlier actions to fight the coronavirus: support for 18 projects with €48.2 million to develop diagnostics, treatments, vaccines and preparedness for epidemics; 8 projects with €117 million invested on the development of diagnostics and treatments through the Innovative Medicines Initiative; 24 projects with €133.4 million granted to addressing pressing needs and the socio-economic impact of the pandemic; and other measures to support innovative ideas through the European Innovation Council. The calls implemented action 3 of the ERAvsCorona Action Plan, a working document resulting from dialogues between the Commission services and national institutions.
Compliments of the European Commission.
The post Coronavirus: EU Commission mobilises €123 million for research and innovation to combat the threat of variants first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

07 Apr
EACC

ECB | What are targeted longer-term refinancing operations (TLTROs)?

Targeted longer-term refinancing operations (TLTROs) are central to making sure that our monetary policy reaches people. Through TLTROs, the ECB offers longer-term loans to banks at favourable costs and encourages them to lend to businesses and consumers in the euro area. This keeps borrowing costs low and supports spending and investments.
How does it work? TLTROs are different from our main refinancing operations in three distinctive ways:

TLTROs are specifically targeted – as the name says – at maintaining or increasing banks’ lending to businesses and consumers.
TLTROs are conditional. Banks only get cheap credit from the ECB if they actually pass the money on to the people and businesses in the form of loans. The maximum amount offered is capped at a share of banks’ loans to companies and households (excluding loans for house purchases). The more a bank granted in loans to companies and households before the start of the operations, the more it can borrow under TLTROs.
TLTROs offer longer-term loans. They only have to be paid back after four years, much longer than the ECB’s standard liquidity-providing instruments. This provides banks with stable and dependable funding.

Why do we offer TLTROs?
TLTROs help to keep the economy going and ensure that businesses and households continue to get the funds they need to stay afloat and invest. TLTROs are one of the main instruments for the ECB to preserve favourable financing conditions. They provide banks with funding certainty at a favourable cost so long as they support lending to firms and households. TLTROs encourage lending when banks would otherwise be more hesitant to give out loans.
By encouraging bank lending, TLTROs ensure that the economy benefits from our monetary policy. The loans to companies and households finance investment and support spending on goods and services, especially when the economy faces major headwinds. This in turn helps us to bring inflation back towards our aim of below, but close to, 2%.
The ECB has launched three series of TLTROs: TLTRO I in 2014, TLTRO II in 2016 and TLTRO III in 2019.
TLTRO III plays an important role in weathering the coronavirus crisis
TLTRO III is one of our key measures to fight the impact of the coronavirus crisis on the economy. Banks can borrow funds from the ECB at a favourable rate as low as -1%. This means they are offered at 0.5 percentage points below the ECB’s deposit facility rate. Banks are rewarded with this lower interest rate if they keep lending to businesses and households. We are offering banks these more attractive terms from 24 June 2020 until 23 June 2022.
This encourages banks to lend more and pass on these attractive terms to companies and households to help them better weather the coronavirus crisis. The third TLTRO programme consists of ten operations, each with a maturity of three years (previous TLTROs had a maturity of up to four years). This means that banks have three years to pay back what they borrowed. TLTRO III operations started in September 2019, before the coronavirus crisis hit the economy. The programme was then adapted to respond to the impact of the crisis in March, April and again in December 2020. The last operation will be conducted in December 2021.
Compliments of the European Central Bank.
The post ECB | What are targeted longer-term refinancing operations (TLTROs)? first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Read More
07 Apr
EACC

IMF | Tailoring Government Support

The race to vaccinate against COVID-19 continues, but the pace of inoculation varies widely across countries, with access unavailable to many. Global cooperation must be stepped up to produce and distribute vaccines to all countries at affordable costs. The sooner vaccinations curb the pandemic, the faster economies can return to normal.

‘The sooner vaccinations curb the pandemic, the faster economies can return to normal.’

If the global pandemic is controlled via vaccination, the resulting stronger economic growth would yield more than $1 trillion in additional tax revenues in advanced economies by 2025—and save more in fiscal support measures. The COVID-19 vaccination will thus more than pay for itself, according to the April 2021 Fiscal Monitor, providing excellent value for the public money invested in it.
Varying degrees of fiscal support
In the first year of COVID-19, fiscal policy has reacted quickly and forcefully to the health emergency. Lifelines have saved lives and protected livelihoods. Fiscal support has also prevented more severe economic contractions and job losses than the world would otherwise have seen, including by easing financial stress when monetary and fiscal policies acted together.
Countries’ ability to scale up fiscal support has varied, depending on their capacity to access low-cost borrowing. In the meantime, economic recoveries are diverging, with China and the United States pulling ahead while other countries lag behind or stagnate.
In advanced economies, fiscal actions have been sizable and cover several years (6 percent of GDP in 2021), such as those recently approved in the United States and featured in the 2021 budget of the United Kingdom. Among emerging markets and developing countries, fiscal support has been more limited owing to financing constraints, but the rise in deficits is still notable as tax receipts have fallen. Average overall fiscal deficits as a share of GDP in 2020 reached 11.7 percent for advanced economies, 9.8 percent for emerging market economies, and 5.5 percent for low-income developing countries.
As a result, average public debt worldwide approached 97 percent of GDP at the end of 2020 and is expected to stay just below 100 percent of GDP over the medium term. Unemployment and extreme poverty have also increased significantly. The pandemic thus risks leaving a deep scar.
Until the pandemic is brought under control, however, fiscal policy will have to remain flexible and supportive. The need and scope for such support varies across sectors and economies, with responses tailored to country circumstances. However, governments should prioritize the following:

More targeted support to vulnerable households. The pandemic has had a disproportionately negative effect on poor people, youth, women, minorities, and workers in low-paying jobs and the informal sector. Policymakers should ensure that social protection is available and spending is sustainable over the duration of the crisis by expanding the coverage of social safety nets in a cost-effective way (for example, by limiting the leakage of benefits to unintended beneficiaries).

More focused support to viable firms. If the pandemic persists, widespread corporate insolvencies could result, destroying millions of jobs, particularly in contact-intensive service sectors and small and medium enterprises. At the same time, governments would do well to prevent resource misallocations and limit the rise of nonviable firms. Governments could gradually roll back blanket loans and guarantees, and limit public support to circumstances in which there is a clear need for intervention. Partnering with the private sector to assess the viability of firms before providing support can improve targeting and reduce administrative costs.

Setting the stage for an economic transition
Policymakers will have to strike a balance between providing fiscal support now, on the one hand, and keeping debt at a manageable level on the other. Some countries may need to start rebuilding fiscal buffers to lessen the impact of future shocks. Developing credible multiyear frameworks for revenue and spending will therefore be vital, especially where debt is high and financing tight.
Many low-income countries, even after doing their part, face challenges in dealing with the pandemic in the near term and for development over time, as indicated in recent IMF research. They will need additional assistance, including through grants, concessional financing, the extension of the Debt Service Suspension Initiative, or, in some cases, debt treatment under the Common Framework.
Done properly, fiscal policy will enable a green, digital, and inclusive transformation of the post-pandemic economy. To make this a reality, governments should prioritize:

Investing in health systems (including expanded vaccinations), education, and infrastructure. A coordinated green public investment push by economies that can afford it can foster global growth. Projects—ideally with the participation of the private sector—would aim at mitigating the effects of climate change and facilitating digitalization.

Helping people get back to work and change jobs, if needed, through hiring subsidies, enhanced training, and job search programs.
Strengthening social protection systems to help counter inequality and poverty, and reinvigorating efforts to achieve the Sustainable Development Goals.
Reforming domestic and international tax systems to promote greater fairness and protect the environment. To help meet pandemic-related needs, a temporary COVID-19 recovery contribution levied on high incomes is an option. Over the medium term, revenue collection should be bolstered, especially in in low-income developing countries, which could help finance development needs.
Cutting wasteful spending, strengthening the transparency of spending initiatives, and improving governance practices to reap the full benefits of fiscal support.

In sum, governments have gone to exceptional lengths to shore up their economies, but further work is needed to get ahead of the COVID-19 pandemic, provide flexible yet targeted support now, adjust when a recovery is firmly in place, and set the stage for a greener, fairer, and more durable recovery.
Compliments of the IMF.
The post IMF | Tailoring Government Support first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Read More
06 Apr
EACC

IMF | An Asynchronous and Divergent Recovery May Put Financial Stability at Risk

After enduring a tumultuous 2020, the global economy is finally emerging from the worst phases of the COVID-19 pandemic, albeit with prospects diverging starkly across regions and countries—and only after a “lost year” spent in suspended animation. The economic trauma would have been much worse if the global economy had not been supported by the unprecedented policy actions taken by central banks and by the fiscal measures implemented by governments.

‘Global markets are watching the current rise of US long-term interest rates.’

Global markets are watching the current rise of US long-term interest rates, worried that a rapid and persistent increase may result in tighter financial conditions, potentially hurting growth prospects. Since August 2020, the yield on the US 10-year Treasury note has risen by 1¼ percentage points to around 1¾ percent in early April 2021, returning close to its pre-pandemic level of early 2020.
The good news is that the rising rates in the United States have been spurred in part by improving vaccination prospects and strengthening growth and inflation. As described in the latest Global Financial Stability Report, both nominal and real interest rates have risen, although nominal yields have risen more, suggesting that market-implied inflation—the difference between yields on nominal and inflation-indexed Treasury securities—is recovering. Allowing a modest amount of inflation has been an intended objective of easy monetary policy.
The bad news is that the increase may reflect uncertainty about the future path of monetary policy and possibly investor concerns about the increased supply of Treasury debt to finance the fiscal expansion in the United States, as reflected by sharply rising term premia (investors’ compensation for interest-rate risk). Market participants are beginning to focus on the timing of the Federal Reserve’s tapering of its asset purchases, which could push long-term rates and funding costs higher, thereby fueling a tightening of financial conditions, especially if associated with a decline in risk assets’ prices.
Global implications
To be clear, global rates remain low by historical standards. But the speed of the adjustment in rates can generate unwelcome volatility in global financial markets, as witnessed this year. Assets are priced on a relative basis, and the price of every financial asset—from a simple mortgage loan to emerging market bonds—is directly or indirectly linked to benchmark US rates. The rapid and persistent rise in rates this year has been accompanied by an increase in volatility, with a risk that such fluctuations might intensify.
Any abrupt and unexpected increase in rates in the United States may translate into a tightening of financial conditions, as investors shift into “reduce risk exposure, protect capital” mode. This could be a concern for risk asset prices. Valuations appear stretched in some segments of financial markets, and vulnerabilities are rising further in some sectors.
Thus far, overall global financial conditions have remained easy. But in countries where the recovery is slower and where vaccinations are lagging, their economies may not yet be ready for tighter financial conditions. Policymakers may be forced to use monetary and exchange-rate policies to offset any potential tightening.
While government bond yields have also risen somewhat in countries in Europe and elsewhere, albeit less so than in the United States, the greatest concern comes from emerging markets, where investor risk appetite may shift quickly. With many of those countries confronting large external financing needs, a sudden sharp tightening in global financial conditions could threaten their post-pandemic recovery. The recent volatility in portfolio flows to emerging markets is a reminder of the fragility of these flows.
Meeting the needs of tomorrow
While several emerging market economies have adequate international reserves, and external imbalances are generally less pronounced as a result of the large import compression, some emerging market economies may face challenges in the future, especially if inflation rises and borrowing costs continue to grow. Emerging market local currency yields have risen meaningfully, driven importantly by an increase in term premia. Our estimate is that a 100 basis point rise in US term premia is associated, on average, with a 60 basis point rise in emerging market term premia. Many emerging markets have sizeable financing needs this year, so they are exposed to the risk of higher rates once they refinance debt and fund large fiscal deficits in the months ahead. Countries that are in weaker economic positions, for example owing to limited access to vaccines, may also face portfolio outflows. For many frontier market economies, access to funding remains a primary concern given limited access to bond markets.
As countries adjust policies to overcome the pandemic, major central banks will need to carefully communicate their policy plans to prevent excess volatility in financial markets. Emerging markets may need to consider policy measures to address excessive tightening of domestic financial conditions. But they will have to be mindful of policy interactions and their own economic and financial conditions, as they make use of monetary, fiscal, macroprudential, capital-flow management, and foreign-exchange intervention.
Continuing policy support remains necessary, but targeted measures are also needed to address vulnerabilities and to protect the economic recovery. Policymakers should support balance-sheet repair—for example, by strengthening the management of nonperforming assets. Rebuilding buffers in emerging markets should be a policy priority to prepare for a possible repricing of risk and a potential reversal of capital flows.
As the world begins to turn the page on the COVID-19 pandemic, policymakers will continue to be tested by an asynchronous and divergent recovery, a widening gap between rich and poor, and increased financing needs amid constrained budgets. The Fund remains ready to support its member nations’ policy efforts in the uncertain period ahead.
Author:

Tobias Adrian, Financial Counsellor and Director of the IMF’s Monetary and Capital Markets Department

Compliments of the IMF.
The post IMF | An Asynchronous and Divergent Recovery May Put Financial Stability at Risk first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

05 Apr
EACC

“COVID-19 shows why united action is needed for more robust international health architecture”

Op-ed article by President Charles Michel, WHO Director General Dr Tedros Adhanom Ghebreyesus and more than 20 world leaders |
The COVID-19 pandemic is the biggest challenge to the global community since the 1940s. At that time, following the devastation of two world wars, political leaders came together to forge the multilateral system. The aims were clear: to bring countries together, to dispel the temptations of isolationism and nationalism, and to address the challenges that could only be achieved together in the spirit of solidarity and cooperation, namely peace, prosperity, health and security.
Today, we hold the same hope that as we fight to overcome the COVID-19 pandemic together, we can build a more robust international health architecture that will protect future generations. There will be other pandemics and other major health emergencies. No single government or multilateral agency can address this threat alone. The question is not if, but when. Together, we must be better prepared to predict, prevent, detect, assess and effectively respond to pandemics in a highly coordinated fashion. The COVID-19 pandemic has been a stark and painful reminder that nobody is safe until everyone is safe.
We are, therefore, committed to ensuring universal and equitable access to safe, efficacious and affordable vaccines, medicines and diagnostics for this and future pandemics. Immunization is a global public good and we will need to be able to develop, manufacture and deploy vaccines as quickly as possible.
This is why the Access to COVID-19 Tools Accelerator (ACT-A) was set up in order to promote equal access to tests, treatments and vaccines and support health systems across the globe. ACT-A has delivered on many aspects but equitable access is not achieved yet. There is more we can do to promote global access.
To that end, we believe that nations should work together towards a new international treaty for pandemic preparedness and response.
Such a renewed collective commitment would be a milestone in stepping up pandemic preparedness at the highest political level. It would be rooted in the constitution of the World Health Organization, drawing in other relevant organizations key to this endeavour, in support of the principle of health for all.  Existing global health instruments, especially the International Health Regulations, would underpin such a treaty, ensuring a firm and tested foundation on which we can build and improve.
The main goal of this treaty would be to foster an all-of-government and all-of-society approach, strengthening national, regional and global capacities and resilience to future pandemics. This includes greatly enhancing international cooperation to improve, for example, alert systems, data-sharing, research, and local, regional and global production and distribution of medical and public health counter measures, such as vaccines, medicines, diagnostics and personal protective equipment.
It would also include recognition of a “One Health” approach that connects the health of humans, animals and our planet. And such a treaty should lead to more mutual accountability and shared responsibility, transparency and cooperation within the international system and with its rules and norms.
To achieve this, we will work with Heads of State and governments globally and all stakeholders, including civil society and the private sector. We are convinced that it is our responsibility, as leaders of nations and international institutions, to ensure that the world learns the lessons of the COVID-19 pandemic.
At a time when COVID-19 has exploited our weaknesses and divisions, we must seize this opportunity and come together as a global community for peaceful cooperation that extends beyond this crisis. Building our capacities and systems to do this will take time and require a sustained political, financial and societal commitment over many years.
Our solidarity in ensuring that the world is better prepared will be our legacy that protects our children and grandchildren and minimizes the impact of future pandemics on our economies and our societies.
Pandemic preparedness needs global leadership for a global health system fit for this millennium. To make this commitment a reality, we must be guided by solidarity, fairness, transparency, inclusiveness and equity.
By J. V. Bainimarama, Prime Minister of Fiji, Prayut Chan-o-cha, Prime Minister of Thailand; António Luís Santos da Costa, Prime Minister of Portugal; Mario Draghi, Prime Minister of Italy; Klaus Iohannis, President of Romania; Boris Johnson, Prime Minister of the United Kingdom; Paul Kagame, President of Rwanda; Uhuru Kenyatta, President of Kenya; Emmanuel Macron, President of France; Angela Merkel, Chancellor of Germany; Charles Michel, President of the European Council; Kyriakos Mitsotakis, Prime Minister of Greece; Moon Jae-in, President of the Republic of Korea; Sebastián Piñera, President of Chile; Andrej Plenković, Prime Minister of Croatia; Carlos Alvarado Quesada, President of Costa Rica; Edi Rama, Prime Minister of Albania; Cyril Ramaphosa, President of South Africa; Keith Rowley, Prime Minister of Trinidad and Tobago; Mark Rutte, Prime Minister of the Netherlands; Kais Saied, President of Tunisia; Macky Sall, President of Senegal; Pedro Sánchez, Prime Minister of Spain; Erna Solberg, Prime Minister of Norway; Aleksandar Vučić, President of Serbia; Joko Widodo, President of Indonesia; Volodymyr Zelensky, President of Ukraine, Dr Tedros Adhanom Ghebreyesus, Director-General of the World Health Organization.
Compliments of the European Council.
The post “COVID-19 shows why united action is needed for more robust international health architecture” first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

Read More
05 Apr
EACC

IMF | Taming the Wave of Small and Medium Enterprise Insolvencies

The pandemic has hit small and medium enterprises particularly hard, partly because they are predominant in some contact-intensive sectors like hotels, restaurants, and entertainment. As a result, many advanced economies risk experiencing a wave of liquidations that could destroy millions of jobs, damage the financial system, and weaken an already fragile economic recovery. Policymakers should take novel and swift action to alleviate this wave.

‘Compared to past crises, this time around there is a clearer case for solvency support by governments.’

Abundant liquidity support through loans, credit guarantees, and moratoria on debt payments have protected many small and medium enterprises from the immediate risk of bankruptcy. But liquidity support cannot address solvency problems. As firms accumulate losses and borrow to keep carrying on, they risk becoming insolvent—saddled with debt well over their ability to repay.
New IMF staff research quantifies this solvency risk, and the findings are concerning. The pandemic is projected to boost the share of insolvent small and medium enterprises from 10 percent to 16 percent in 2021 across 20 mostly advanced economies in Europe and the Asia-Pacific region. The increase would be on a magnitude similar to the rise in liquidations in the 5 years after the 2008 global financial crisis, but it would take place over a much shorter period of time. Projected insolvencies put about 20 million jobs at risk (i.e., over 10 percent of workers employed by small and medium enterprises), roughly the same as the total number of currently unemployed workers, in the countries covered by the analysis.
Further, 18 percent of small and medium enterprises may also become illiquid (they may not have enough cash to meet their immediate financial obligations), underscoring the need for continued liquidity support.
The implications for banks are another cause for concern. Rising small and medium enterprise insolvencies could trigger defaults and cause significant write-offs, depleting banks’ capital. In hard-hit countries—mostly from Southern Europe—banks’ capital tier 1 ratios (a key measure of their financial strength) could decline by over 2 percentage points. Smaller banks would be hit even harder, as they often specialize in lending to smaller businesses: a quarter of them could experience a drop of at least 3 percentage points in their capital ratios, while 10 percent could face an even larger fall of at least 7 percentage points.
“Quasi”-equity injections
Compared to past crises, this time around there is a clearer case for solvency support by governments. Because of the sheer magnitude of the problem, the costs of bankruptcies to society far exceed their costs to individual debtors and creditors. For example, if a wave of insolvencies overwhelms the courts, these could fail to restructure viable firms and push them into liquidation instead. Undue losses in valuable productive networks, human capital, and jobs would follow.
In practice, countries with adequate fiscal space, transparency, and accountability could consider quasi-equity injections into small and medium enterprises. Indeed, several are already actively exploring this option, notably in Europe. One approach is for governments to extend “profit participation loans” through fresh loans or conversion of existing ones. These loans would be junior to all other existing debt claims and their payoff could be partly indexed to the firm’s profits. Targeting the right businesses—those insolvent as a result of the pandemic but that have viable business models—is very hard. For this reason, governments might consider conditioning their support on private investors (like banks) injecting equity, which would let the market take a leading role in identifying a firm as a viable business. France, Italy, and Ireland have proposed or enacted policies to incentivize private investors to contribute equity. Support could also be staggered over time, and new tranches deployed only as viability uncertainty dissipates.
Targeted quasi-equity injections would be far more efficient and powerful than providing support to all firms. Across-the-board (blanket) injections benefit two types of firms that should not receive solvency support: those that do not need it because they are solvent even amid the crisis, and those that would have been insolvent even without the pandemic—that also happen to be less productive. As an illustration, a targeted support program with a budget of roughly half a percent of the overall GDP of the 20 countries analyzed could bring back over 80 percent of the right firms (viable but currently insolvent) to zero net equity (a minimal definition of solvency). This is over four times more than would be achieved under a blanket approach supporting all small and medium enterprises without distinction.
Beefing up insolvency and debt restructuring mechanisms
Even with public support measures, small and medium enterprise insolvencies are likely to rise. Therefore, a comprehensive set of insolvency and debt restructuring tools will be needed for the insolvency proceedings system to cope with the added strain. These tools include dedicated out-of-court restructuring mechanisms, hybrid restructuring, and strengthened insolvency procedures—for instance, simplified reorganization for smaller firms. Since liquidations may be excessive even under well-functioning insolvency procedures, governments could provide financial incentives to tilt the balance towards restructuring.
To secure a strong recovery, governments in advanced economies need to address the risks of small and medium enterprise distress. Combining continued liquidity support, quasi-equity injections and enhanced restructuring mechanisms could go a long way toward that goal.
Authors:

Federico J. Díez, Economist at the Structural Reforms Unit of the IMF’s Research Department

Romain Duval, Assistant Director in the IMF’s Research Department

Chiara Maggi, Economist at the Middle East and Central Asia Department of the IMF

Nicola Pierri, Economist at the Macro-Financial Division of the IMF Research Department

Compliments of the IMF.
The post IMF | Taming the Wave of Small and Medium Enterprise Insolvencies first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

05 Apr
EACC

IMF | Global Recovery: The EU Disburses SDR141 Million to the IMF’s Catastrophe Containment and Relief Trust

Washington, DC / Brussels: The International Monetary Fund (IMF) today received the European Union (EU)’s contribution of SDR 141 million (equivalent to €170 million or US$199 million) to the Catastrophe Containment and Relief Trust (CCRT), which provides grants for debt service relief to countries hit by catastrophic events, including public health disasters such as COVID-19.
Jutta Urpilainen, European Commissioner for International Partnerships, said: “Through this contribution to the CCRT, Team Europe continues to stand in solidarity with its most vulnerable partners. In this difficult period, the resources freed up can provide social services for the most vulnerable people, such as access to essential healthcare and education for young people, including girls. Team Europe’s Global Recovery Initiative is working to provide debt relief and sustainable investment for the SDGs.”
“The EU’s generous contribution of €183 million is critical to help the world’s most vulnerable countries cope with the impact of the COVID-19 crisis and continue providing health care, economic and social support for their people. I am grateful to the EU and its member states for their support and strong partnership. I urge other countries to contribute to the CCRT so we can in turn support our most vulnerable member countries,” IMF Managing Director Kristalina Georgieva noted.
This disbursement is part of the EU’s overall contribution of €183 million (SDR152 million or US$215 million) to the CCRT. It finances grants for the third tranche of CCRT debt service relief that was approved by the IMF´s Executive Board on April 1, 2021.
The EU stands ready to disburse its remaining grant contribution in support of additional debt service relief in the context of potential future CCRT tranches. With this contribution, the EU, together with the EU institutions and its Member states, has committed more than half of the current CCRT pledges.
Together with the third tranche, the IMF has provided about SDR519 million (about US$736 million or €626 million) in grants for debt relief to all 29 CCRT-eligible members since the pandemic began in early 2020. The purpose of the debt relief initiative under the CCRT is to free up resources to meet exceptional balance of payments needs created by the disaster rather than having to allocate those resources to debt service.
Background
The CCRT provides grants to pay debt service owed to the IMF by eligible low-income member countries that are hit by the most catastrophic of natural disasters or battling public health disasters—such as the COVID-19 pandemic.
CCRT-eligible countries are those eligible for concessional borrowing through the IMF’s Poverty Reduction and Growth Trust (PRGT) and whose annual per capita gross national income level is below $1,175. Vulnerable countries most seriously affected by the COVID-19 crisis benefit from the CCRT.
The EU, as a global player, can help integrate debt relief into a broader policy dialogue, financing strategies and actions, in order to ‘build back better.’
This €183 million contribution is fully in line with Commission President von der Leyen’s proposal for a Global Recovery Initiative that links investments and debt relief to the Sustainable Development Goals.
The beneficiaries of the third CCRT tranche are Afghanistan, Benin, Burkina Faso, Burundi, Central African Republic, Chad, Comoros, Democratic Republic of the Congo, Djibouti, Ethiopia, The Gambia, Guinea, Guinea-Bissau, Haiti, Liberia, Madagascar, Malawi, Mali, Mozambique, Nepal, Niger, Rwanda, São Tomé and Príncipe, Sierra Leone, Solomon Islands, Tajikistan, Togo and Yemen.
For More Information
Links:
IMF Executive Board Approves 3rd CCRT Tranche: Paper and Press Release
Factsheet on CCRT:
https://www.IMF.org/en/About/Factsheets/Sheets/2016/08/01/16/49/Catastrophe-Containment-and-Relief-Trust
Q&As on CCRT:
https://www.IMF.org/external/np/fin/ccr/index.htm
Compliments of the IMF.
The post IMF | Global Recovery: The EU Disburses SDR141 Million to the IMF’s Catastrophe Containment and Relief Trust first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

02 Apr
EACC

Eurogroup| To compare the EU and US pandemic packages misses the point

Opinion article by Eurogroup President, Paschal Donohoe |
Comparison is inevitable at moments of great challenge. The wisdom of former US president Theodore Roosevelt that “comparison is the thief of joy”, comes to mind in contrasts between the size of stimulus packages and the strength of economic forecasts.
Comparisons diminish the significant and historic efforts taken to boost our economies, and to develop and rollout vaccines at unprecedented speed. The 27 countries of the EU have stood together, ensuring that those most economically affected have been supported and that all member states have access to vaccines. These co-ordinated efforts are supporting tens of millions of people.
This unity may come at a short-term cost to the largest and strongest members of our union, but they and all others benefit from our unity in the longer term. We have learnt over the centuries of the deep linkages across our continent and the reality that one country’s growth at the expense of its neighbours is not sustainable.
To this end, in 2020 alone, Europe implemented budgetary supports equal to 7 per cent of gross domestic product and liquidity supports of 17 per cent of GDP, while the US stimulus figures were 10 per cent and 7.7 per cent. There is a difference, but it is not as significant as suggested by some. Critically, a focus on scale understates the size and transformational nature of the support being provided, particularly for the EU economy.
Important differences exist. The EU has chosen to focus its response on protecting employment through job-retention schemes to keep people in work, rather than relying on direct transfer payments. American state and local governments, which have had to cut spending as, unlike the federal government they must balance their budgets, have laid off 1.3m employees. Europe has maintained public service jobs.
This is because the EU’s supportive fiscal policy stance, combined with the suspension of fiscal rules and the establishment of a temporary framework for state aid, have allowed governments to put in place unprecedented levels of budgetary support. The three European safety nets, including SURE which has committed €100bn to protect workers against the risk of unemployment, complement national responses.
The monetary policy decisions and forward guidance from the European Central Bank, which have preserved favourable conditions for the economy, are indispensable. The measures taken have protected millions of jobs and livelihoods, and cushioned the impact of the pandemic crisis on companies. Their positive effect can be seen in how the rise in unemployment has been contained compared with the drop in economic activity.
In addition to these supports, the EU’s Next Generation package and Recovery and Resilience Facility will result in a further €750bn in spending beginning this year. This initiative, an emergency grants and loan programme funded by temporary common debt, would have been unthinkable before the pandemic.
Eurozone finance ministers are united in the approach that until the health crisis is over and recovery firmly under way, we will protect our economy with the necessary support. The US economy is forecast to return to pre-pandemic levels in 2021 while the EU’s is forecast to do so by 2022. A year is a long time in the grim duration of this disease.
In response, we have agreed a supportive budgetary stance in the euro area for 2021 and 2022, the importance of which is reinforced by the increased coronavirus public health restrictions announced in recent days.
Actions are important, but their success is all that really matters to the citizens we serve. The speedy implementation of the RRF, and additional national measures, will lead our economies through the Covid-19 crisis. The reality is that most growth forecasts do not recognise the full impact of the RRF or the national measures. Moreover, every day we see more people being vaccinated, and we expect to have over 300m vaccines in Europe by May — a vital step towards normality.
But there is no room for complacency; urgency is paramount. European economic efforts last year were unprecedented, yet fresh and demanding challenges approach. We understand this. We are determined to rise to them.
Analogies of a contest may persist, but this is not a race to the largest stimulus package. It is the outcomes that matter, the livelihoods saved and living standards recovered. The fact that the budget stimuluses in the US and Europe are double those of the 2008 global financial crisis shows that the participants realise the deadly seriousness of the challenge.
Compliments of Eurogroup.
The post Eurogroup| To compare the EU and US pandemic packages misses the point first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

02 Apr
EACC

OECD | Tax transparency moves forward as no or only nominal tax jurisdictions first exchange information on the substance of entities

Twelve no or only nominal tax jurisdictions1 began their first tax information exchanges today under the Forum on Harmful Tax Practice’s (FHTP) global standard on substantial activities. The standard ensures that mobile business income can no longer be parked in a low tax jurisdiction without the core business functions being carried out from that jurisdiction and that the countries where the parent entities and beneficial owners are tax resident get access through regular exchanges of information.
These new annual exchanges cover information on the identity, activities and ownership chain of entities established in no or only nominal tax jurisdictions that are either non-compliant with substance requirements or engage in intellectual property or other high-risk activities.
“Today’s first exchanges of information on the previously unknown operations of entities in low tax jurisdictions, are good news for tax administrations around the world, as they will now have regular access to information on the activities and income of entities in low tax jurisdictions that are held or controlled by their taxpayers,” said Pascal Saint-Amans, Director of the OECD Centre for Tax Policy and Administration.
The exchanges will enable receiving tax administrations to carry out risk assessments and to apply their controlled-foreign company, transfer pricing and other anti-base erosion and profit shifting provisions.
The FHTP is monitoring both the legal and practical implementation of the standard by no or only nominal tax jurisdiction through a rigorous, annual peer review process under Action 5 of the OECD/G20 Inclusive Framework on BEPS. The next annual results will be released in December 2021.
For more information, visit: www.oecd.org/tax/beps/beps-actions/action5/
Compliments of the OECD.
The post OECD | Tax transparency moves forward as no or only nominal tax jurisdictions first exchange information on the substance of entities first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

01 Apr
EACC

ESMA | EU Financial Regulators War of an Expected Deterioration of Asset Quality

The three European Supervisory Authorities (EBA, EIOPA and ESMA – ESAs) issued today their first joint risk assessment report of 2021. The report highlights how the COVID-19 pandemic continues to weigh heavily on short-term recovery prospects. It also highlights a number of vulnerabilities in the financial markets and warns of possible further market corrections.
Macroeconomic conditions improved in the second half of 2020, supported by ongoing fiscal and monetary policy efforts, but the resurgence of the COVID-19 pandemic since the last quarter of 2020 has led to increasing economic uncertainty. The start of the rollout of vaccinations provides a crucial anchor for medium-term expectations, but insufficient production capacities, delays in deliveries as well as risks related to mutations of the virus are weighing heavily on short-term recovery prospects.
Macroeconomic uncertainty was generally not reflected in asset valuations and market volatility which have recovered to pre-crisis levels, highlighting a continued risk of decoupling of valuations from economic fundamentals.
In light of these risks and uncertainties, the ESAs advise, national competent authorities, financial institutions and market participants to take the following policy actions:

Prepare for an expected deterioration of asset quality: banks should adjust provisioning models to adequately address the impact of the economic shock of the pandemic and to ensure a timely recognition of adequate levels of provisions. They should engage to restructure over indebted but viable exposure efficiently. To supervisors, banks’ provisioning policies should continue to be a point of particular attention;

Continue to develop further actions to accommodate a “low-for-long” interest rate environment and its risks: while low interest rates are important to support economic activity, they negatively impact banks’ interest income and remain the main risk for the life insurance and pension fund sector. For insurers, it is important that the regulatory framework also reflects the steep fall in interest rates experienced in recent years and the existence of negative interest rates. Financial institutions should also continue to monitor, and be prepared for, changes in interest rates, especially in light of the recent upward shifts of long-term interest rates and the consequent concerns about re-emerging inflationary pressures;

Ensure sound lending practices and adequate pricing of risks: banks should continue to make thorough risk assessments to ensure that lending remains viable in the future, and this should be closely monitored by supervisors. Banks should continue to make thorough risk assessments to ensure that lending remains viable, including after public support measures such as loan moratoria and public guarantee schemes will expire;

Follow conservative policies on dividends and share buy-backs: any distributions should not exceed thresholds of prudency; and

Investment funds should further enhance their preparedness in the face of potential increases in redemptions and valuation shocks: to this end the alignment of fund investment strategy, liquidity profile and redemption policy should be supervised, as well as funds’ liquidity risk assessment and valuation processes in a context of valuation uncertainty.

Background
The three ESAs cooperate regularly and closely to ensure consistency in their practices. In particular, the Joint Committee works in the areas of supervision of financial conglomerates, accounting and auditing, micro-prudential analyses of cross-sectoral developments, risks and vulnerabilities for financial stability, retail investment products and measures combating money laundering. In addition, the Joint Committee also plays an important role in the exchange of information with the European Systemic Risk Board.
The Joint Committee is the forum for cooperation between the European Banking Authority (EBA), European Securities and Markets Authority (ESMA) and European Insurance and Occupational Pensions Authority (EIOPA), collectively known as the ESAs.
Compliments of the European Securities and Market Authority (ESMA).
The post ESMA | EU Financial Regulators War of an Expected Deterioration of Asset Quality first appeared on European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources.

«‹144145146147148›»