Headlines

The economic pain for Greece may be similar to other southern European nations. The European Commission forecasts that Greek national income will shrink by 9.7% this year, compared with 9.5% in Italy and 9.4% in Spain, Bloomberg News reported in a commentary. The country is, however, expected to rebound more sharply in 2021, by 7.9%, compared with an expectation of 6.5% growth for Italy and 7% for Spain. Greece’s initial contraction — set to be the largest in the EU — is happening because the economy relies heavily on tourism. As foreigners stay at home, hotels and restaurants suffer.

Germany will see a substantial increase in government debt as it spends its way out of the coronavirus crisis, with its debt-to-GDP ratio set to increase to 77 per cent from below 60 per cent currently, its finance minister said, the Financial Times reported. Olaf Scholz made the announcement on Wednesday as he presented a second supplementary budget for 2020 that envisages additional borrowing of €62.5bn. Added to the €156bn of new debt included in the first extra budget in March, that takes the total for this year to €218.5bn.

A record number of distressed debt funds are seeking to raise fresh capital as the coronavirus pandemic sparks dislocation in the credit markets, Bloomberg News reported. Seventy funds that focus on troubled companies are looking to bring in a combined $72 billion of capital amid a possible prolonged downturn, according to London-based research firm Preqin. That’s more than double the capital targeted by distressed debt funds during 2019, and is higher than any point since 2016. Private credit firms have been building up distressed debt funds for years in preparation for a downturn.

The Bank of England is widely expected to boost its support for the U.K. economy again on Thursday amid signs that recovering from the pandemic-induced recession will be harder than hoped, Bloomberg News reported. Economists predict the central bank will expand its bond-buying program by 100 billion pounds ($125 billion), taking it to 745 billion pounds, and investors are watching keenly for any hint of radical policies such as negative interest rates and yield curve control. The decision will be announced at noon in London.

Air France plans to offer about 8,300 staff incentives to leave in a bid to cut costs without stirring a political backlash after receiving a massive state bailout, people familiar with the proposal said, Bloomberg News reported. The Air France-KLM unit will seek the voluntary exit of around 300 pilots, 2,000 cabin crew and 6,000 ground staff, according to the people, who asked not to be named because the plans aren’t public. The cuts could affect roughly 17% of workers, though that may change after union and management talks, they said.

LATAM Airlines Group said on Wednesday its Argentine subsidiary will cease operations indefinitely, canceling all domestic flights, its first major cutback since filing for bankruptcy protection, Reuters reported. The announcement fell short of saying the company, Latin America’s largest airline, will entirely wind down its subsidiary, although it is unclear if it will ever resume operations. A LATAM spokesman said the subsidiary will begin a government process in Argentina before it can lay off 1,715 employees.

Antonio Barbosa had hoped to find new employment when the bakery he worked at in São Paulo fell victim to Brazil’s prolonged economic slump, the Financial Times reported. Then the coronavirus pandemic struck, all but killing off the 41-year-old’s hopes of finding work and leaving him sleeping on the streets. “I fear things will not get better in this country, so I will never have a job again,” he said. His plight reflects the enormous challenges confronting Latin America’s largest economy.

German airline Lufthansa, responding to investor criticism of a state-backed rescue deal, warned it might need to apply for protection from creditors if the bailout plan failed to win shareholder approval, Reuters reported. Lufthansa’s biggest shareholder, German billionaire Heinz Hermann Thiele, criticised the 9 billion euro ($10.1 billion) bailout, saying he had raised his stake in Lufthansa to over 15% and hoped alternative options could be explored.

Despite trillions of dollars of stimulus sloshing around and credit being funneled into the global economy, the coronavirus is forcing countless businesses into bankruptcy, Bloomberg News reported in a commentary. The weak are getting weaker, and the big are thrown lifelines. That divide will only grow wider. The case of Japan, where insolvencies are rising sharply, shows that no matter how much cash you have, size matters more: Micro-enterprises across all sectors account for around 70% of companies going under, despite a large portion having net cash.

Developed nations are considering financial support for a plan to relieve African countries of debt payments without triggering default, according to the United Nations committee steering the initiative, Bloomberg News reported. The debt-swap deal would channel payments due this year on international bonds back to the African nations, helping them fight the coronavirus and its economic impact.