Empty shelves are seen at a supermarket in Watford, Britain, March 11, 2020.
Empty shelves are seen at a supermarket in Watford, Britain, March 11, 2020.

LONDON/ROME - Britain announced a $39-billion war chest to soften the economic impact of the coronavirus after the Bank of England cut interest rates on Wednesday and Italy, the worst-affected country outside China, said it might further tighten already draconian curbs.

U.S. President Donald Trump, who for weeks played down the seriousness of the illness and blamed "fake news" for its spread, said on Tuesday he would ask Congress for a tax cut for workers and other "very major" stimulus moves to ease the economic effect, but the details were unclear.

The coronavirus, which emerged in China in December, has spread around the world, halting industry, bringing flights to a standstill, closing schools and forcing the postponement of sporting events and concerts. Even the Tokyo Summer Olympics are in question.

The West has watched in shock as infections have ballooned in Italy, Iran, France and Spain after more moderate growth elsewhere.

German Chancellor Angela Merkel said up to 70% of the world's population was likely to be infected in the absence of a cure.

"When the virus is out there, the population has no immunity and no therapy exists, then 60 to 70% of the population will be infected," she told a news conference in Berlin.

The Bank of England joined many other countries in cutting interest rates, by half a percentage point, and announced support for bank lending.

Britain also launched a 30-billion pound ($39-billion) economic stimulus plan as new finance minister Rishi Sunak said the economy faced a "significant impact" from the spread of the virus, even if it was likely to be temporary.

"Up to a fifth of the working-age population could need to be off work at any one time. And business supply chains are being disrupted around the globe," Sunak said in an annual budget speech to parliament.

He announced a package of measures to help companies facing a cash-flow crunch, including a year-long suspension of a property tax paid by smaller firms. The health system and other public services would receive an extra 5 billion pounds to help counter the spread of the coronavirus.

More restrictions possible in Italy

A view of an empty street on the second day of an unprecedented lockdown across all of the country, imposed to slow the outbreak of coronavirus, in Naples, Italy, March 11, 2020.

Last week, the Italian cabinet said it would need just 7.5 billion euros to fight the virus, but since then the emergency has escalated and the nation, already close to recession, is under lockdown.

Prime Minister Giuseppe Conte on Wednesday earmarked $28.3 billion to ease the economic impact. He said that already tough restrictions on movement might be tightened more after the northern region of Lombardy, centered on Italy's financial capital Milan, asked for all shops to shut and public transport to close.

"We are ready to listen to requests from Lombardy and other regions," Conte said. "The main objective is to protect citizens' health, but we must take into account that there are other interests at stake. We must be aware that there are civil liberties that are being violated, we must always proceed carefully."

A rebound in stocks ran out of steam on Wednesday despite the Bank of England move. Money markets are fully pricing in a further 10 basis-point cut by the European Central Bank when it meets on Thursday.

U.S. stock futures dropped 3.32%. As of Tuesday's close, $8.1 trillion in value has been erased from global stock markets in the recent rout.

More than 119,100 people have been infected by the coronavirus across the world and 4,298 have died, the vast majority in China, according to a Reuters tally. Italy has had 10,149 cases and 631 deaths. Iran has had 9,000 cases and 354 deaths.

But not all the news was bad.

As cases exploded in the West, some key industries in Wuhan, the Chinese city at the epicenter of the epidemic and a center of car manufacturing, were told they could resume work on Wednesday, a day after President Xi Jinping visited the city for the first time since the outbreak began.

Health authorities elsewhere in the country were lowering emergency response levels and relaxing travel restrictions.

($1 = 0.7732 pounds)

 

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