Our editors give us a breakdown of this week’s biggest news stories
United Kingdom: Ross Alexander Hutton
Amidst the concerning news of further redundancies on UK high-streets by John Lewis and Boots, Rishi Sunak, in a speech venturing into uncharted territory for a Tory Chancellor, announced a £30 billion plan to prevent mass unemployment. By confirming the phasing-out of the furlough scheme and the introduction of a £1000 job retention bonus per employee kept on the books through to January, the Treasury will be hoping to minimise the job losses during the transition of workers back onto the payroll. Notably, the introduction of the ‘Eat Out to Help Out’ Scheme which discounts restaurant meals in August and the six-month 15% VAT reduction for the hospitality and tourism sectors, are attempts to stimulate demand for some of the hardest hit industries. With the ‘ball now in the court’ of consumers and businesses, the Treasury awaits to discover the effectiveness of these measures and prepares for further stimulus as well as facing the difficult fiscal realities in the Autumn.
As the R-number rises slightly in England to between 0.8 and 1, further restrictions have been eased in the UK. Although England stepped closer to ‘normality’ as outdoor pools and outdoor theatres were reopened, the Culture Secretary admitted the measures were conditional and reversible. Meanwhile in Scotland, Nicola Sturgeon repeated her note of caution, warning that “we mess with [coronavirus] at our peril” as indoor visits to other households and overnight stays are now allowed.
In a break from her “where there’s a will, there’s a way” mantra, German Chancellor Angela Merkel told the European parliament “progress in negotiations thus far has been slim” – raising fresh doubts over the prospect of a UK-EU deal in the coming months. As the clock ticks and the UK government remains intransigent on not extending the transition period, an agreement on issues ranging from trade to security appears to be increasingly doubtful.
China’s ambassador to Britain sparked fresh concerns over China-UK relations when he warned of “consequences” for Britain if it classes China as a hostile state. Of course, the fallout of this diplomatic attrition is the future of Huawei’s role as a supplier of Britain’s 5G network – a highly contentious issue with serious implications for the UK’s telecommunications and China’s strategic position in the world.
Europe: Peter Hourston
Emmanuel Macron’s reshuffle came under fire from the #MeToo movement as he stood by his new interior minister Gérald Darmanin after the Paris appeal court reopened an investigation into allegations that he raped a woman in 2009.
The second round of the Polish presidential election takes place today as incumbent Andrzej Duda of the PiS is taken on by the centrist Mayor of Warsaw Rafal Trzaskowski. The race has been marked by the controversial remarks about LGBT+ rights, claiming it was an “ideology worse than communism.”
In an interview with the FT, the President of the ECB, Christine Lagarde, described the economic crisis facing Europe as ‘brutal’ as the bloc negotiates a €750 billion recovery fund.
Asia Pacific: Lucy Wright
Singapore’s ruling People’s Action Party (PAP) has retained power in Friday’s general election but with a reduced majority, final results show. The PAP, who have been in power since 1965, attained 61.2% of the vote – compared to nearly 70% from the 2015 poll. Singapore is one of only a handful of countries to have held a vote during the pandemic, and the election was widely seen as a referendum on the government’s handling of the coronavirus outbreak.
China’s imposition of a draconian national security law on Hong Kong has prompted some citizens to plan their personal exit strategies. For up to three million Hongkongers, the exit could come in the form of British National (Overseas) – or BNO – passports, which were issued to residents who registered before the city was handed back to China in July 1997. The controversial national security law, which took effect last week, has been seen as the last straw for many who say that Hong Kong has become unrecognisable in its handling of the months-long protests triggered by a bill which proposed to allow extradition to mainland China.
Meanwhile, Australian Prime Minister, Scott Morrison announced last week that visa extensions for Hong Kongers already in Australia would allow them to stay an additional five years and open a path to permanent residency. Declaring, “We are a great immigration nation” Morrison also suggested that businesses should move from Hong Kong to his country. The announcement threatens to deepen the diplomatic tensions between Canberra and Beijing.
Africa & Middle East: Camille Capelle
Another explosion has occurred in Iran, the third blast in a key state facility in three weeks. With the damages done to the Nantanz facility, it is estimated that it could take two years to recover their nuclear capabilities to the same level. Though materially problematic, another significant impact of these suspected clandestine attacks is in shaking Iran’s confidence by proving that even their most protected facilities can become targets. Some kind of retaliation is expected although only time will tell where these are directed.
Ethiopia’s continuing construction of Africa’s largest dam further exacerbates tensions with Egypt and Sudan. The dispute centers around fears that the water reservoir will cause critical water shortages for other countries dependent on the Blue Nile. After 10 years of unsuccessful talks, Addis Abada claims he will go ahead with the project unilaterally in the case that no agreement can be formed, despite opposition from other states.
Amid the already dire living conditions in refugee camps in northeast Syria, fears rise over the disastrous consequences that COVID-19 could have if it reaches the camps. 700 deaths have already been confirmed in the two largest camps, al-Hol and Roj, due to overcrowding and lack of adequate food and medicine supplies. Although no COVID cases have appeared in the camps themselves yet, the virus is known to have reached northern Syria. Combined, the two camps house over 700,000 refugees in conditions where such a virus could spread unobstructed.
North America: Amelia Brown
Disney World opened this weekend, with new safety measures in place such as temperature checks, mandatory masks, social distancing, hand sanitizer stations, and limited capacity. Although the company is estimated to have lost $1 billion last quarter and furloughed about 100,000 employees, the opening of the parks has seen about 20,000 workers returned.
Two more big supreme court cases were decided this week, both concerning President Trump. First, the court stated that the President is not immune to state criminal subpoenas of his financial records. However, the second case about Congress’ subpoenas of Trumps’ tax records was basically given back to the lower courts to more carefully consider the role of separation of powers. It is unlikely that any records will be released before the election in November.
Trump was publicly photographed wearing a mask for the first time since the pandemic Saturday at a visit to a military hospital, as new cases reached a record daily high of 71,389.
South America: Annie Smith
After dismissing the COVID-19 pandemic, lockdowns, and face coverings, Brazilian President Jair Bolsonaro has tested positive for the coronavirus. Speaking to press on Tuesday, President Bolsonaro wore a face mask in a rare show of following protocol. He stated that his symptoms of a high temperature and cough began on Sunday and got tested the next day after feeling worse. At the press briefing, he also confirmed that he has taken hydroxychloroquine, a drug previously advocated by President Donald Trump for fighting the coronavirus, and antibiotic azithromycin to treat his illness, yet neither have been proven to be affective against COVID-19.
Along with Bolsonaro, Bolivia’s interim president Jeanine Añez and Honduran President Juan Orlando Hernández announced this week that they had tested positive for COVID-19. And in Venezuela, second-in-command Diosdado Cabello announced that he had also tested positive. The news comes as the pandemic continues to rage in South and Latin America with no indication of slowing down. Four South American countries – Brazil, Peru, Chile, and Mexico – are in the top ten of world rankings for their total number of cases. In terms of their 7-day moving average, Brazil is currently averaging about 37,000 new cases a day and over 1,000 deaths; more than 3,200 cases and 182 deaths on average in Peru; 2,880 new cases and 99 deaths on average in Chile; and 6,200 new cases and 600 new deaths in Mexico.
Science & Technology: Paula Plechschmidt
On Monday TikTok announced that they would withdraw completely from Hong Kong due to the Chinese government’s new security law. The law will allow Beijing to affect life in Hong Kong like never before and significantly curtail the population’s freedom. This is alongside other tech giants such as Microsoft, Facebook, Twitter and Google, all of which have decided to temporarily block Hong Kong authorities from accessing user data.
Clearview AI, a company that for a long time has been at the center of the facial recognition security debate has been brought back into the spotlight. UK and Australian information commissioners have announced a further investigation into the firm. The software it had produced gathers images from social media in order to find matches and has been sold to over 600 law enforcement agencies. Especially in light of the BLM movement and concerns about unfair discrimination of minorities through facial recognition software, this has become an incredibly relevant issue.
The UK is in the process of making the decision to end Huawei’s involvement in the 5G project. While the government had already decided to cap Huawei’s market share of 5G to 35%, many ministers have been pushing for high-risk vendors to be excluded outright. This stems from the geopolitical tensions between the US and China, as the trump administration claims Huawei poses a threat to national security and data privacy. Boris Johnson is set to make his decision by Tuesday next week.
Business: Tom Woods
The “fast fashion” retailer Boohoo has seen its market value plummet by over £1 billion after the Sunday Times exposed illegal working conditions in its supply chain. In the “Jaswal Fashions” factory in Leicester, workers were paid just £3.50/hour while social distancing and hygiene measures were neglected amidst a strict local lockdown in the city. The revelations have led to major firms such as Aberdeen Standard Investment selling their investments in the company, while third party platforms Asos, Zalando, and Next have all dropped Boohoo lines from their shops and websites. The backlash against these revelations represents part of a growing movement opposing fast fashion and pushing for more ethical, environmentally friendly supply chains. Public awareness of and attitude towards these issues are changing but there is still strong demand for low-cost disposable fashion, as evidenced by Primark’s recent “encouraging” re-opening of physical shops.
UK Chancellor Rishi Sunak this week announced further plans to help businesses survive. In a bid to lure consumers back, he has pledged to lower VAT on food, accommodation, and attractions from 20% to just 5%. A scheme to encourage dining out has also been introduced, which gives the public up to 50% off food and drinks (excluding alcohol) during August. Sunak also announced a £1000 bonus to businesses for every staff member kept on the furlough scheme for at least 3 months. The measures faced criticism from Labour, who argued they do not go far enough to protect workers. “We were promised a ‘New Deal’, but what we got was a ‘Meal Deal’”, said the party in a statement.
Theory: Cassi Ainsworth-Grace
Central banks across the world are now considering unconventional monetary policy strategies as the Covid-19 pandemic progresses. Previously in the EuroZone, AAA-rated sovereign securities issued by central banks, particularly by the Bundesbank and De Nederlandsche Bank, were on the decline, with the number being issued shrinking by 40% between 2007 and 2018. With the pandemic, central banks are no longer fixated on maintaining a balanced budget, as Germany predicts a fiscal deficit as much as 7.5% of GDP this year. These issuances also come from an unusual source, as the European Commission itself plans to raise €100 billion to finance the EuroZone’s recovery. This new issuance is attracting different attention than usual, as investors from Asia begin to eye the bonds.
On the other hand, the US Federal Reserve is looking beyond its aggressive quantitative easing programs to controlling yield curves. This involves capping interest rates on bonds, significantly hampering price signalling and risk pricing. Concerns have arisen, as some analysts are concerned the markets would be effectively nationalised as the Fed would control the price signal.