There is a sigh of relief in markets as the long Easter weekend approaches. Sadly, too many are suffering or worse from the cursed virus and many millions of key workers will be providing support to ensure “the lights stay on” for the rest of us.  However, we know that many companies and industries will be able to access cash; furloughing staff (rather than redundancy) is happening however, it is on what terms that cash is available and ultimately who pays that matters.

Today, the government announced further borrowing through its “Ways and Means” account. This is Her Majesty’s Government’s overdraft. As uncertainty continues and the bills mount, the overdraft provides the ability for HMG to write the cheques. As the overdraft gets bigger, the Bank of England will refinance the overdraft via Gilts. At a time of crisis it is fortunate that the Bank of England can print money; it is currently set to have bought a further £200bn of Gilts and corporate bonds by July. But will it be enough? Given that the £435bn of debt that Bank of England accumulated in various rounds of QE since 2009 have never been repaid, what is the likely political will to pay this £200bn (or more)?

And so it is in Europe. There are general warm words to help one another, but details failed to be agreed by the European finance ministers during their 16 hour teleconference on Wednesday. The European Central Bank is actively spending up to €1tn but in a potential re-run of the Euro crisis, Spain and Italy – in the eye of the humanitarian crisis – are not hearing warm words from the so called “frugal” countries in northern Europe. The Netherlands, Germany and others are not inclined to share the financial burden by having joint responsibility for new debt. Joint responsibility for debt at an instant puts an end to Eurozone crisis but there remains little likelihood that there is the political will in Germany and elsewhere to pay.

But some are paying. Shareholders of some of Europe’s largest insurance companies are following the Banks and not paying dividends. But EIOPIA’s (European Insurance and Occupational Pensions Authority) writ runs less large than that of banking regulators. As we saw last week, a letter from the PRA can stop banks’ dividends and curtail bankers’ remuneration. More of a mixed bag this week from insurers that currently leaves Legal and General paying its dividend but Aviva not. Dutch insurers were advised not to pay dividends but there is a more mixed response in France.

And savers are paying. With effective cash balance rates now at zero, savers will need to look elsewhere for income. Dividends from corporates are now very uncertain with companies like Tesco also under the spotlight. And for all of the government’s largesse, Rishi Sunak talks of loans. Someone will need to repay at some stage; for all of the financial engineering we have seen over the past weeks it would be naïve to think that taxation is headed lower – COVID 19 in many ways is a great leveller.

As and when we return to normality it will not be as it was. There will be long and visceral debate – which has already started – about who pays. 

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