EU foreign affairs chief says end of US-led global system may have arrived and Europe needs robust strategy for ChinaThe Asian century may have arrived marking the end of a US-led global system, the EU’s foreign affairs chief has said amid a growing discussion in Europe on how to weave a path between China and the US.“Analysts have long talked about the end of an American-led system and the arrival of an Asian century. This is now happening in front of our eyes,” Josep Borrell told a group of German diplomats on Monday, adding that the coronavirus pandemic could be seen as a turning point and that the “pressure to choose sides is growing”.Related: Post-coronavirus, the UK must find some friends to stand up to China | Martin KettleRelated: China raises US trade tensions with warning of ‘new cold war’ Continue reading...

Unite union says Project Birch, the government’s rescue plan, is ‘finally taking shape’

Republicans, including the president, have opposed the additional funds. But their expiration could bring ‘incredible suffering’

Australia has mishandled the inquiry into Covid-19, but it is in uncomfortable and unfamiliar territory

CEBR recalculates one-day shutdown as financial boost after ‘enforced abstinence’ from Covid-19 lockdownA prominent economist, who once suggested that the average bank holiday left the UK with a bill for billions of pounds, says an extra national holiday in October might boost the country’s economy by £500m.Douglas McWilliams, deputy chairman of the Centre for Economics and Business Research (CEBR), also suggested a move towards a four-day working week could help the UK’s finances – in an apparent reversal of his thinktank’s previous position.Related: Extra UK bank holiday could help cut £37bn tourism loss, MPs told Continue reading...

Rising unemployment is toxic for the property market and low interest rates may not be enoughThis weekend marks the start of a truncated summer house buying season, the moment the residential property market comes out of hibernation.Normally this happens at easter but, for obvious reasons, that has not been possible in 2020. Estate agents have been shuttered along with almost every other business, waiting impatiently for the lifting of the lockdown. This bank holiday weekend, with fine weather forecast, provides a chance to make up for lost time. Continue reading...

Governor Andrew Bailey is signalling that extreme measures such as negative interest rates are on the table. Rightly soWhen the Bank of England governor says he is not ruling out a cut in the cost of borrowing to below zero, you know there is trouble ahead.Negative interest rates are the last resort of the central banker and not to be used unless absolutely necessary. At least that is the thinking inside the forbidding walls of the Bank’s offices on Threadneedle Street. Only a couple of weeks ago, governor Andrew Bailey said, in effect, that the Bank had never lowered interest rates to below zero and wasn’t going to start now.The problem lies with savers who are offered negative interest on their savings. What if they refuse to accept this new reality? Continue reading...

The unique nature of the pandemic means the economic downturn could impact women for decades

Even avid free-marketeers see that only state money can get growth going, but the chancellor is suddenly running scaredA consensus has emerged that the only route out of the lockdown is with government cash. From across the political divide there is support, offered reluctantly in some quarters, for the idea that only state-funded agencies will have the financial muscle and the will to put the wheels of the economy in motion once the pandemic has receded.Private-sector companies emerging from the deep freeze will need to tiptoe before they run, hence the Royal Society of Arts and Manufacturing’s proposal of an initial three-day week. Theirs must be a slow re-emergence, observing physical distancing.This is a Tory government, so the best Sunak can do is still worth something Continue reading...

Covid-19 deaths are still rising, but there are signs of quarantine fatigue – and experts warn relaxing the rules too soon could have devastating consequences

Talks to restructure ‘unsustainable’ debt held by overseas investors continue

Despite some fine words about the environmental crisis, ministers are pushing ahead with a trade bill that threatens to damage the planetThe dust storms that devastated the US prairie during the Great Depression were the worst ecological disaster in American history. They were also, partly, manmade. Decades of farming in the Great Plains had rid the topsoil of its native grass, leaving nothing to prevent fields crumbling to dust when drought struck in 1931. Across the Dust Bowl in midwest America, millions of acres of farmland were swept away in brown blizzards. Forced off the land, hungry families headed west in search of new jobs and lives. The dust blew so far east that it settled on the White House lawn.Almost 90 years ago the US president’s response was not to lie about the scale of disaster or blame others. Instead, Franklin D Roosevelt launched one of his New Deal’s signature relief programmes: the Civilian Conservation Corps. Its mission was to put unemployed Americans to work. More than 3 million people planted 3bn trees, built shelter belts across the Great Plains to reduce the risk of dust storms, and created 700 state parks. FDR’s legacy survives, but his policy is venerated more in name than in deed. Continue reading...

Investors fear move will further heighten tensions between Beijing and WashingtonFears that moves by China to tighten its political control over Hong Kong will lead to heightened tensions between Beijing and Washington have weighed on international markets.With investors already anxious about the economic damage caused by the Covid-19 pandemic, the crackdown on dissent in Hong Kong caused shares to fall in Asia and in the US on Friday. Continue reading...

UK public borrowing soars to £62bn in a single month and retail sales slump by 18%

Recessions blight young people’s prospects for decades. We need New Deal-type policies now to help themYouth unemployment and its scarring effects on the careers of young people were a major concern in the 2008-09 recession. Now that hopes for a “V-shaped recovery” from the Covid-19 pandemic are vanishing, the issue of scarring is again relevant.Past research has shown that those who enter the labour market during a downturn carry the costs of doing so into middle age. These come in the form of lower wages and higher risk of unemployment. Whereas the work and pensions secretary, Thérèse Coffey, may claim it is “too early to set anything like that at all” (BBC Today Programme 19 May), the evidence is clear: recessions do lasting damage to young people.Related: Young workers most likely to have lost jobs during Covid-19 crisisRelated: How do we stop an unemployment pandemic? | Ewan McGaughey Continue reading...

The government has borrowed more in April than expected for the whole year. It can’t be paid back via austerity

Consumer spending plummeted 18% in April revealing stark impact of coronavirus restrictions

After the financial crisis, green investment paid dividends. Coronavirus presents an even greater opportunityEverest is once again visible from Kathmandu, after decades shrouded in pollution. Greenhouse gas emissions have fallen to levels last seen in 2006. Nature has returned to our streets with a quack and a flurry, and people are waking to birdsong in inner cities as the roar of traffic recedes.Clear skies bring little cheer at the food bank, however. Birdsong might lift the heart, but it won’t pay the rent.Related: Coronavirus fallout to slow global growth in renewable energyRelated: Decarbonisation is our future. It must be factored into the coronavirus recovery | Pradeep Philip and Will Rayward-SmithFiona Harvey is the Guardian’s environment correspondent Continue reading...

Rolling coverage of the latest economic and financial news

Variable-rate mortgages may fall a little, and it seems unlikely banks will charge to hold savingsThe governor of the Bank of England, Andrew Bailey, has paved the way for negative interest rates, saying officials are actively considering all options to prop up the economy.The Bank’s base rate stands at 0.1%, the lowest level on record, so it would not take much to take it into negative territory. The UK would not be the first country to have a negative rate at its central bank – Japan and Sweden are among those that have done so. Continue reading...

Rise of PMI after April historic low due to coronavirus is good news, but economic activity is still falling

Coronavirus and looming Brexit means recovery ‘measured in years, not months’, says survey

As inflation plummets, the bond market believes the coronavirus recession will be so severe that the rate will go lower yetRoll up! Who wants to lend to the UK government for three years for zero interest?Lots of people. The debt management office – a busy place these days – shifted £3.8bn worth of three-year gilts on Wednesday at a yield of -0.003%. If buyers hold their paper for the full three years, they will get back slightly less than they invested. Continue reading...

Governor says all options are open after UK sells first ever bond with negative yield

Rolling coverage of the latest economic and financial news, as UK central bank tells MPs it is keeping its ‘lower bound’ under review

His nation-building work programmes are an unsurpassed example of what governments can do when markets collapse

Andrew Bailey is obliged to write to Rishi Sunak after fall to 0.8%. What might he say?

Expecting employers to pay up to 40% of staff wages will result in a second wave of huge job losses

Coronavirus lockdown and consequent oil price collapse send rate plummeting

Call to avoid more inequality and climate breakdown when coronavirus crisis endsGlobal leaders must heed the lessons of the financial crisis of 2008 when they look to repair the damage from the coronavirus pandemic, leading experts have warned, to avoid entrenching disastrous social, health and environmental inequalities and hastening climate breakdown.The 2008 global financial crisis and recession marked the last time the world experienced a convulsion comparable in scale to the coronavirus crisis, though starkly different in its nature. Governments responded first with economic rescue and stimulus packages worth trillions in taxpayer cash, followed in many cases by austerity programmes to cut back public spending. Continue reading...

Pace will slow for first time in 20 years with fewer windfarms and solar plants being built but rebound possible in 2021The global growth of renewable energy will slow for the first time in 20 years due to the impact of the coronavirus pandemic, which will “hurt but not halt” the rise of clean energy.The world’s energy watchdog has warned that developers will build fewer wind farms and solar energy projects this year compared with a record roll out of renewables in 2019. Continue reading...

Exclusive: Frances O’Grady says working people ‘can’t pay the price again

State lending should promote corporate survival, not underwrite executive pay packetsAbout time too: the Treasury has finally flexed its muscles and said large companies using government and Bank of England-backed loan schemes cannot also pay cash bonuses to directors or dividends to shareholders.The restrictions are really just an act of common sense: state loans should promote corporate survival, not underwrite executives’ pay packets or investors’ distributions. Most boards probably grasped the point, but the job of the Treasury is to ensure the door is bolted firmly against the devious and the greedy. It’s astonishing it has taken this long for a bonus ban to be adopted. Continue reading...

Rishi Sunak warns UK facing recession ‘the likes of which we haven’t seen’ due to Covid-19 crisisThe chancellor, Rishi Sunak, has warned that Britain is facing a “severe recession, the likes of which we haven’t seen” and lasting economic damage from the coronavirus pandemic.In a downbeat assessment of the country’s economic prospects after a sharp rise in unemployment benefit claims, the chancellor warned a Lords committee it was “not obvious there will be an immediate bounceback” from recession. Continue reading...

Companies that use extended scheme to be banned from paying dividends to investors

Government sets out plan to cut tariffs, with farming and car industry to be protectedBusiness has warned Boris Johnson that he must clinch a free trade deal with the EU after the government released details of the tariffs Britain will impose from the start of next year.With talks between London and Brussels stalled, employers organisations said they welcomed arrangements that will provide protection for farmers and carmakers but stressed the need for progress in talks with the UK’s biggest trading partner.Dishwashers (2.7%).Freezers (2.5%).Tampons (6.3%).Paints (6.5%).Screwdrivers (2.7%).Mirrors (4%).Scissors (4.7%).Padlocks (2.7%).Baking powder (6.1%).Yeast (12%).Bay leaves (7%).Ground thyme (8.5%).Cocoa powder (8%).Christmas trees (2.5%). Continue reading...

Rolling coverage of the latest economic and financial news, as new data shows the UK claimant count jumped over 2m in April

Official figures have not yet caught up with the bleak jobs market – and the crunch point is still to come

Number claiming unemployment benefits reaches almost 2.1 million

Resolution Foundation report confirms under-25s hardest hit by the economic fallout

In one of the best performances since the crisis began, global stock markets rise sharply

Biotech firm Moderna reports positive early results from coronavirus vaccine trial, as US central bank insists it can do more to protect economy

Coronavirus policies to help the vulnerable are already being jettisoned. Those who want change need to be up for the battleIt is now certain. We will emerge from lockdown grieving for those lost and yearning for our previous lives, only to crash into a recession. As much as we dream of visiting our favourite cafe or pub, it’s not clear they will remain after the virus has run its course.Already reality heaves into view. The hospitality industry is being battered. One in four restaurants in the US is expected never to reopen. Amazon is finishing off the retail sector. Small businesses, cafes, online retailers and clothes designers are struggling. Loved and carefully nurtured ventures, operating on the thinnest of margins, are dying out. Every few days another one of them posts its goodbyes. We think of the world as how we left it. But that world is gone.The working classes, the cleaners, the construction workers, have become the canaries sent back down the coal mineRelated: We're all keen to show we care, but we've shaped a society that doesn’t care at all | Sam Byers Continue reading...

Survey finds 60% of workers are at most three months away from rent or mortgage default

UK must reabsorb those out of work due to Covid, says Bank of England’s chief economist

Local economies across country have been adversely affected by loss of students and tourists

Conservatives must understand that the country they rule is not exceptional

Some in the Treasury are panicking about a debt pile set to hit 115% of GDP, but the chancellor – and most economists – agree that austerity is not the answerBritain is on course for a £300bn increase in government debt this year as the bills for keeping much of the economy mothballed during the coronavirus outbreak continue to mount.Money to support businesses that have closed down make up the lion’s share, and the rest can be accounted for by increased welfare costs and the loss of billions of pounds to the exchequer in taxes that will never be paid.Even the architects of austerity agree almost-zero borrowing costs and low inflation give the Treasury an opportunity Continue reading...

The pandemic and its economic impact should persuade even this cabinet of the value of a two-year delay to departure‘There are,” said a former top Treasury official last week, “some strange people in this cabinet with strange ideas.” The speaker was Lord Macpherson, the former Treasury permanent secretary, who during his time at the department now run by Chancellor Sunak had the unrivalled experience of serving Ken Clarke, Gordon Brown, Alistair Darling and George Osborne. Both Macpherson and Osborne were on a “webinar” – yes, a word that is new to me too – hosted by the Strand Group of King’s College London to discuss a report co-authored by a former shadow chancellor, Ed Balls.Balls is still actively involved in the economic debate, and it was in his capacity as a visiting fellow at Harvard that he was presenting a report on the prospects for a US/UK trade deal. Well, to put it mildly, the Harvard team found precious little for the UK to gain from such a deal. Even if something can, as it were, be trumped up, it would hardly be worth the cellphone from which it would no doubt be tweeted.Starmer has been saying that Brexit cannot be reversed. I comfort myself with the hope that he is being cautious and playing politics Continue reading...