World battles to stave off another Great Depression

Financial markets swung wildly yesterday as governments and central banks stepped up their unprecedented fight to save the world from another Great Depression. 

As the coronavirus continued to spread, economists warned that the world has already tumbled into recession as businesses are shut down, schools are closed and people are told not to leave their homes. 

In a bid to save the economy from a downturn, Chancellor Rishi Sunak promised to pay 80 per cent of wages up to £2,500 a month for employees who cannot work because of the outbreak, and offered tax breaks to business. 

A day after cutting interest rates to a record low of 0.1 per cent and pumping an extra £200billion of emergency cash into the economy, the Bank of England relaxed rules for lenders so they can continue to offer loans to families and businesses. 

Kallum Pickering, senior economist at investment bank Berenberg, said: ‘The UK is now running a ‘virus war’ economy. The usual rules do not apply.’ 

Amid hopes that stimulus packages around the world would stave off an even bigger disaster, the FTSE100 rose as much as 5 per cent in early trading. 

But by the close of play it was up just 0.8 per cent. In the US, the Dow Jones Industrial Average was down 4.6 per cent. 

The pound also made early gains, rising above $1.19 having fallen to a 35-year low below $1.15 earlier in the week. Last night it was trading at around $1.16. 

A report by Oxford Economics said the UK was on course for ‘a deep, short recession’ in the first half of this year before rebounding. 

And in a chilling warning, analysts at Goldman Sachs predicted the US economy, the biggest in the world, will shrink at an annual rate of 6 per cent in the first quarter of the year and a record 24 per cent in the second quarter. 

Goldman also said unemployment in the US would rise from 3.5 per cent to 9 per cent – putting millions of Americans out of work. 

Concerns over the outlook have triggered an unprecedented response from governments and central banks. 

Sunak’s extraordinary package included a pledge to pay 80 per cent of wages for employees not working due to the outbreak, an extra £7billion of welfare payments and a £30billion tax holiday for business. 

Hours earlier the Bank of England announced further emergency measures, having a day earlier cut interest rates to 0.1 per cent and promised to pump an extra £200billion of newly printed money into the economy. 

The Bank also took co-ordinated action with the US Federal Reserve, the European Central Bank, the Bank of Japan, Bank of Canada and the Swiss National Bank to make it cheaper and easier for multinational companies to access US dollars. 

Jasper Lawler, head of research at London Capital Group, said: ‘There are big questions about how the whole thing will work. It’s a tough ask to get workers and businesses the cash they need to stay afloat in time