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Economy

UK's plan B if 'Team Johnson' is incapacitated? Answer is unclear

LONDON, March 27 (Reuters) – What would happen if British Prime Minister Boris Johnson’s case of coronavirus – so far he has “mild symptoms” – were to become more serious or even incapacitate him and his team? Under Britain’s uncodified constitution, the answer is unclear.

Johnson and Health Secretary Matt Hancock both said they were able to keep working from self-isolation at home after confirming they had tested positive for the virus.

But the fact that two such crucial members of the British government have contracted the disease – and their top medical adviser is now self-isolating with symptoms – has raised questions about how the government would function without them at a time of global crisis.

With only an unwieldy collection of sometimes ancient and contradictory precedents to go by, there is no simple, formally-enshrined “Plan B” or succession scenario, experts said.

“We’ve not been in that kind of situation, we’ve not had to think about it from that point of view before,” Catherine Haddon, a senior fellow at the Institute for Government, told Reuters.

Whereas in the United States the vice president steps up if the president dies or becomes incapacitated, Britain has no formal deputy or caretaker prime minister who would take over.

Downing Street has already said, however, that Foreign Secretary Dominic Raab would deputise if necessary.

Nor is there any guidance for such circumstances in the Cabinet Manual which sets out the rules and conventions for the running of government, and there is little precedence.

When asked about who would stand in for the prime minister, his spokesman said: “The prime minister has the power to delegate responsibility to any of his ministers, but for now it is the prime minister and then the foreign secretary.”

CHURCHILL’S STROKE

In June 1953, then-Prime Minister Winston Churchill suffered a stroke while in office. His illness was kept so secret that some senior ministers were unaware.

Churchill surprised doctors by recovering to carry on his duties, returning to Downing Street and running the cabinet two months later.

More recently, Tony Blair twice underwent treatment for a heart condition while prime minister in the early 2000s, each time briefly cutting back on his workload for a couple of days.

Officials said had he been incapacitated, his then-deputy John Prescott would take over until a new leader was elected.

There is no suggestion Johnson is unable to perform his job, and his spokesman said he could carry on as before, although he was now doing so via teleconferencing.

Bob Kerslake, head of the civil service from January 2012 to September 2014, agreed that Johnson and ministers could continue to operate by video, but said there were potential drawbacks.

“It is a cabinet government but the prime minister’s role is crucial at this time, not least … because of the visible leadership that the country needs,” he told Sky News.

MUDDLE THROUGH?

Kerslake said officials would need to know there was a system for what would happen if senior ministers were unable to do their jobs.

Losing Cabinet Office minister Michael Gove, who coordinates policy across government, would be a serious blow.

“He is critical to all of this,” Kerslake said. “If, for whatever reason, he was ill, who takes over from him?”

Haddon said some powers were specifically vested in cabinet ministers, so there was an issue of what happened if they were unavailable.

“If you got to a stage where … you had secretaries of state who aren’t able to perform their functions, then there are question marks about whether junior ministers in their department act on their behalf,” she said.

One lawmaker in Johnson’s party, who has repeatedly tried to bring in a law to formalise who would replace a prime minister in the event of incapacity, said last week no one seemed to know what would happen.

“In a national emergency, you don’t want to be scrabbling around worrying about who’s in charge,” Peter Bone told the Mirror newspaper.

However, Haddon said naming Raab as Johnson’s substitute would prevent a political squabble among senior ministers over who fronted press conferences or chaired meetings.

“It is valuable for them to work out contingencies for various scenarios and they have obviously done a certain amount of thinking about that,” she said.

She said prime ministers and cabinet ministers were often absent and government operated in their absence.

“Secretaries of state go on holiday and their department functions without them. The prime minister goes on holiday and the rest of government is able to continue working,” she added.

“If there are things that (are) invested in a secretary of state and it is not proper for someone to act on their behalf, that’s when it becomes a problem.” (Editing by Guy Faulconbridge and Mike Collett-White)

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GLOBAL MARKETS-Stocks fall as virus uncertainty lingers; dollar set for weekly loss

* Graphic: World FX rates in 2020 tmsnrt.rs/2egbfVh (Updates prices, changes comment, byline, dateline; previous LONDON)

By Rodrigo Campos

NEW YORK, March 27 (Reuters) – Stocks across the globe fell on Friday after a historic three-day run-up, with indexes poised to close the month and quarter with starkly negative performances.

The volatility of the erratic markets is expected to continue as the coronavirus pandemic that triggered closures in economies worldwide remains very much a threat.

The United States surpassed two grim milestones on Thursday as virus-related deaths soared past 1,000 and it become the world leader in confirmed cases.

The uncertainty over the overall human and economic toll was reflected in financial markets, with MSCI’s gauge of global stocks on track to post both its largest weekly percentage gain since 2008 and its largest monthly and quarterly drops since 2008.

The infection rate for the coronavirus is driving much of the market at a time of great uncertainty, said Yousef Abbasi, global market strategist at INTL FCStone Financial Inc in New York.

“My big hang-up here is when the curve does start to flatten, that doesn’t mean we can return to normal human and economic behavior. If we do return to normal human and economic behavior, we risk the chance the curve goes parabolic again. Just from the perspective of how long this potentially can last, there’s still a great deal of uncertainty,” he said.

The Dow Jones Industrial Average fell 827.25 points, or 3.67%, to 21,724.92, the S&P 500 lost 87.31 points, or 3.32%, to 2,542.76 and the Nasdaq Composite dropped 255.69 points, or 3.28%, to 7,541.85.

The pan-European STOXX 600 index lost 3.22% and MSCI’s gauge of stocks across the globe shed 2.41%.

Emerging market stocks lost 1.07%.

Stock markets have rallied over the past week on trillions of dollars of enacted and pledged economic stimulus by policymakers worldwide, from central banks to governments.

Policymakers may need to offer more stimulus as the virus slams the brakes on economic activity and increases healthcare spending.

“Next week, markets will likely continue to focus on the spread of COVID-19 – whether European cases are reaching a peak, how much of the U.S. will be put in lockdown, and whether China can avoid a second wave,” said Gaétan Peroux, strategist at UBS Global Wealth Management.

The U.S. House of Representatives is expected to pass a $2.2 trillion stimulus package that will flood the world’s largest economy with money to stem the economic damage caused by the pandemic.

Amid the avalanche of stimulus, the U.S. dollar was little changed for the day and remained on track for its biggest weekly decline since May 2009.

The dollar index fell 0.393% on Friday.

The euro was up 0.24% to $1.1055, the Japanese yen strengthened 1.57% versus the greenback at 107.92 per dollar, while Sterling was last trading at $1.2367, up 1.36% on the day.

The U.S. currency’s fall after two weeks of steep gains suggests the Federal Reserve’s efforts to relieve a crunch in the dollar funding market are working, some analysts said.

“What we are seeing is abating stress in the money markets. Action by central banks has been successful so far and a shortage of dollars has been taken off the table,” said Ulrich Leuchtmann, head of FX and EM research at Commerzbank.

U.S. Treasury yields were headed for a weekly decline, though the range of trading was far less volatile than in the previous two sessions.

Benchmark 10-year notes last rose 22/32 in price to yield 0.7377%, from 0.808% late on Thursday. The 30-year bond last rose 1-26/32 in price to yield 1.3267%, from 1.395%.

Oil prices continued their fall on demand concerns as the virus slowed economies to a crawl, which outweighed the stimulus efforts.

U.S. crude recently fell 5.44% to $21.37 per barrel and Brent was recently at $24.54, down 6.83% on the day.

Gold market participants remained concerned about a supply squeeze after a sharp divergence between prices in London and New York. The virus has grounded planes used to transport gold and closed precious metal refineries.

Spot gold dropped 0.3% to $1,623.82 an ounce. The metal was on track to post its largest weekly advance since 2008.

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Economy

UPDATE 2-Lebanon vows total economic overhaul by year-end amid debt talk kick off

* Central bank has $22 bln of liquid FX reserves

* Economy expected to contract 12% in 2020

* Inflation predicted to top 27% this year (Adds details, investor presentation slides)

By Tom Arnold and Eric Knecht

LONDON/BEIRUT, March 27 (Reuters) – Lebanon launched formal debt restructuring talks on Friday with a pledge to implement an economic turnaround plan by year-end, but officials painted a gloomy picture of rapidly dwindling reserves and soaring inflation ahead.

Lebanon, one of the world’s most indebted countries, suspended payments on all $31.3 billion of its international Eurobonds this month, saying it could no longer repay them while prioritising scarce dollars for critical imports.

It has also earmarked some $57 billion of domestic T-bills and bonds for restructuring, while just over $2 billion of bilateral and multilateral debt will remain untouched.

“This government has a full agenda over the coming months to design and implement its comprehensive recovery plan, and conduct its public debt restructuring,” Finance Minister Ghazi Wazni said in a webcast presentation.

“Our aim is to finalise this ambitious turnaround agenda before year-end 2020.”

Finance ministry officials described an economy sinking deeper into turmoil, projecting a GDP contraction of 12% for 2020 and inflation topping 27%, an outlook made worse by the outbreak of coronavirus and no sign that badly needed foreign inflows would soon return. The country’s economy had already contracted by nearly 7% last year, the presentation showed.

Having defaulted for the first time, the country’s dollar-denominated bonds have slumped to around 15 cents on the dollar in recent weeks, with a broader global market rout adding to the challenge facing Lebanon to turn around its economy.

The presentation showed the central bank’s liquid foreign exchange reserves at $22 billion and public debt at 178% of GDP at end-2019.

“Confidence in the past economic model is shattered. External and fiscal imbalances have become greater than Lebanon can bear and the complete reshaping of Lebanon’s economic and banking system…have become necessary, said Finance Ministry Director General Alain Bifani.

Bifani said reforming the country’s oversized banking sector required “disentangling” the links between cash-strapped commercial banks and the central bank after years of them funnelling dollars to the central bank at sky high interest rates.

The debt negotiations mark a new phase in a crisis that has seen the Lebanese pound lose more than 40% of its value since October, while hundreds of thousands of jobs have been lost and scores of businesses shut.

Government officials said they were aiming for a fair and equitable treatment of creditors.

Lebanon has asked creditors to register their holdings by April 17.

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UPDATE 2-Mexico poised to provide Pemex with 'extraordinary support' -S&P

(Recasts first sentence with details on Pemex support, adds comments by S&P analyst, oil industry details)

MEXICO CITY, March 27 (Reuters) – Mexico’s government will likely prop up state oil firm Petroleos Mexicanos (Pemex) due to its vulnerability to low crude prices as coronavirus erodes demand, S&P Global Ratings said Friday, a day after it cut the ratings of both Mexico and Pemex.

The ratings agency is the second in the past week to highlight Latin America’s second-largest economy as being vulnerable, after Fitch Ratings said Pemex would be the national oil company hit hardest among regional peers.

Lisa Schineller, lead analyst for S&P’s sovereign ratings in Latin America, said the government of President Andres Manuel Lopez Obrador had shown strong support for Pemex, which is laboring under a huge debt burden.

This is further complicated by the fact that Maya crude for delivery to the U.S. Gulf Coast plummeted to as low as $12.92 per barrel on March 18. Experts say Pemex is highly vulnerable to prices below $20 per barrel.

The price has since recovered somewhat, but is still below levels seen earlier this year, before the coronavirus started to roil the Americas. It closed at $14.23 per barrel on Thursday, data from S&P Global Platts showed.

Schineller also said the government was signalling that Pemex would be at the center of its agenda. Pemex is therefore unlikely to be decoupled from the sovereign rating, she added.

“The government will provide extraordinary support for Pemex – with almost complete certainty,” she said.

Both are rated BBB since the cut from BBB+ on Thursday. (Reporting by Stefanie Eschenbacher and Abraham Gonzalez in Mexico City Editing by Matthew Lewis)

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Macron told EU leaders "survival of European project" at stake in virus crisis

PARIS, March 26 (Reuters) – French President Emmanuel Macron warned his fellow European Union leaders on Thursday that the coronavirus outbreak risked undoing the bloc’s central pillars such as its no-border zone if they failed to show solidarity in this crisis, a diplomat said.

“What’s at stake is the survival of the European project,” he told the 26 other leaders in a conference call, according to a French diplomat. “The risk we are facing is the death of Schengen,” Macron added, according to the same source. (Reporting by Michel Rose; Editing by Sandra Maler)

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Singapore, South Korea affirm importance of keeping trade, supply chains open amid coronavirus crisis

SINGAPORE – Singapore and South Korea reiterated the importance of ensuring open trade flows and supply chain connectivity amid the coronavirus outbreak as the two countries reaffirmed their close and multifaceted economic ties.

This came about during a videoconference on Friday (March 27) between Minister for Trade and Industry Chan Chun Sing and South Korean Trade Minister Yoo Myung Hee, said the Ministry of Trade and Industry (MTI) in a media release.

Mr Chan on Wednesday announced that Singapore would work closely with six countries – Australia, Canada, Chile, New Zealand, Myanmar and Brunei – to ensure that trade lines via land, air and sea remain open for the flow of goods and essential supplies amid the challenges posed by the pandemic. Singapore and New Zealand also affirmed their commitment to ensure supply chains remain open and connected earlier this month.

During their discussion on Thursday, Mr Chan and Ms Yoo also agreed to work closely to facilitate business exchanges to support the operations of companies in both countries.

They also discussed ways to strengthen bilateral and regional trade ties, including cooperation in the digital economy.

As participating countries in the Regional Comprehensive Economic Partnership (RCEP) agreement, the ministers also affirmed their commitment to help the proposed trade pact reach a signing this year, a move which will boost global economic recovery following the Covid-19 pandemic, said the statement.

The RCEP includes 15 member countries, including all Asean nations, and accounts for nearly 30 per cent of the world’s gross domestic product.

South Korea was Singapore’s eighth largest trading partner in 2019, with total bilateral trade amounting to $39.4 billion, said MTI. In 2018, Singapore was the sixth largest foreign investor in South Korea, while the country’s was the Republic’s sixth largest Asian foreign investor, it added.

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CANADA FX DEBT-Canadian dollar climbs to nine-day high as greenback falters

    * Canadian dollar rises 0.7% against the greenback
    * Loonie touches its strongest since March 17 at 1.4078
    * Price of U.S. oil decreases 2.6%
    * Canadian bond yields fall across a flatter curve

    TORONTO, March 26 (Reuters) - The Canadian dollar
strengthened to a nine-day high against its U.S. counterpart on
Thursday as data showing a surge in American unemployment
benefit claims weighed on the greenback, with the loonie adding
to the prior day's largest rally in four years.
    At 9:16 a.m. (1316 GMT), the Canadian dollar          was
trading 0.7% higher at 1.4092 to the greenback, or 70.96 U.S.
cents. The currency touched its strongest intraday level since
March 17 at 1.4078.
    On Wednesday, the loonie surged 1.9%, its biggest gain since
March 2016.
    The rally for the loonie on Wednesday came as Canada doubled
the value of an aid package to C$52 billion ($36.9 million) to
help people and businesses deal with losses from the coronavirus
outbreak             
    Ontario, Canada's most populous province, also said it would
provide coronavirus aid. Its package is worth C$17 billion
including tax deferrals.              
    The U.S. dollar        fell against a basket of major
currencies for a fourth straight day, while U.S. crude oil
futures        were down 2.6% at $23.85 a barrel. Oil is one of
Canada's biggest exports.                          
    Canadian oil and gas companies are urging Ottawa to free up
credit and cash to help them survive the twin shocks of COVID-19
spread and a crude price war, pitching ideas ranging from tax
deferrals to backstopping bank loans.             
    The number of Americans filing claims for unemployment
benefits shot to record of more than 3 million last week as
strict measures to contain the coronavirus pandemic ground the
country to a sudden halt.                     
    Canadian government bond yields fell across a flatter curve
in sympathy with U.S. Treasuries. The 10-year             was
down 8.3 basis points at 0.819%.

 (Reporting by Fergal Smith; editing by Jonathan Oatis)

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Airbnb hosts to provide free rooms for British health workers

LONDON, March 29 (Reuters) – Airbnb hosts will provide free rooms for workers in Britain’s National Health Service (NHS) to support their work during the coronavirus outbreak, the company said on Sunday.

Nearly 1,500 places to stay have been made available under the scheme amid a slump in bookings on the home rental start-up as travel restrictions and curbs on social gatherings come into force around the world.

Britain has looked to bolster its public health service to deal with the crisis, including establishing a field hospital in a one-time Olympic venue and turning a theme park into a testing facility for health workers.

“By working together, we can ensure that frontline workers can find a free and convenient place to stay as they continue their critical work,” said Patrick Robinson, Director of Public Policy at Airbnb.

Airbnb has done similar schemes in Italy and France in response to the outbreak, and aims to house 100,000 emergency personnel around the world during the epidemic.

The company has suspended marketing activities to save money, and executives are taking a pay cut as the firm battles with a downturn in bookings triggered by the spread of coronavirus.

Airbnb’s bookings in major cities across the world have suffered as travellers cancel trips and stay at home to protect themselves and prevent the spread of coronavirus. (Reporting by Alistair Smout; Editing by Giles Elgood)

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Russian central bank allocates $2 bln for small, medium firms to pay salaries

MOSCOW, March 27 (Reuters) – The Russian central bank said on Friday it would channel up to 150 billion roubles ($1.92 billion) to small- and medium-sized companies to ensure flawless payments of salaries, as part of the state measures amid the coronavirus outbreak.

The central bank will also provide loans to banks at a rate of 4% for one year to ensure payment of salaries, as Russia prepares to shut many businesses during a week-long holiday the country will observe to limit the spread of the coronavirus.

To support market liquidity, the central bank said it would offer 500 billion roubles in repo operations, taking into account the span of non-working days from March 30 to April 3. ($1 = 78.2910 roubles) (Reporting by Andrey Ostroukh; Editing by Jon Boyle)

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UPDATE 1-Portugal headed for recession, says central bank

(Adds details, background)

By Sergio Goncalves and Catarina Demony

LISBON, March 26 (Reuters) – Portugal’s economy will enter a recession this year as the coronavirus outbreak hits private consumption and investment, and its export sector will collapse, the central bank said on Thursday.

Portugal has 3,544 confirmed cases of coronavirus, with 60 reported deaths, far below other southern European countries such as Italy and Spain.

In its economic bulletin, the first data set showing the impact the fast-spreading coronavirus will have on Portugal’s economy, the Bank of Portugal said gross domestic product will drop between 3.7% and 5.7% in 2020. Last year the economy grew 2.2%.

Private consumption is set to fall 2.8% and 4.8% and exports will decrease 12.1% and 19.1% this year, according to the bulletin. Private investment will drop between 10.8% and 14.9%.

The unemployment rate is set to increase to between 10.1% and 11.7% this year, compared to 6.6% in 2019.

“The outlook for the Portuguese economy deteriorated sharply and significantly as a result of the impact of the Covid-19 pandemic,” the Bank of Portugal said in a statement, adding the outbreak will have “very significant and potentially long-lasting effects”.

Portugal declared a state of emergency on March 18, which meant the closure of non-essential businesses, a measure affecting thousands of jobs across the country.

The government also announced a 9.2 billion euro ($9.98 billion) package worth 4.3% of annual GDP to support workers and provide liquidity for companies affected by the outbreak.

Boosted by the exports sector, the tourism industry and private investment, Portugal’s economy has been steadily growing since 2014, when the country exited a strict bailout programme following the 2008 financial crisis.

On Wednesday Portugal reported a budget surplus of 0.2% of gross domestic product in 2019 – its first in 45 years of the country’s democratic history – after a deficit of 0.4% in 2018.

That day Finance Minister Mario Centeno said all scenarios pointed to an economic recession due to the impact of the coronavirus and restrictive measures implemented to stem the pandemic. (Reporting by Sergio Goncalves and Catarina Demony Editing by Raissa Kasolowsky)

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