An infectious disease outbreak has long been a top national security risk in several countries, but the speed and extent of COVID-19’s spread and the scale of its social and economic impact has come as an enormous and deeply worrying shock.

This pandemic is not just a global medical and economic emergency. It could also prove a decisive make-or-break point for today’s system of global political and economic cooperation.

This system was built up painstakingly after 1945 as a response to the beggar-thy-neighbour economic policies of the 1930s which led to the Second World War. But it has been seriously weakened recently as the US and China have entered a more overt phase of strategic competition, and as they and a number of the other most important global and regional players have pursued their narrowly defined self-interest.

Now, the disjointed global economic response to COVID-19, with its enormous ramifications for global prosperity and economic stability, has blown into the open the urgent need for an immediate reaffirmation of international political and economic cooperation.

What is needed is a clear, coordinated and public statement from the leaders of the world’s major countries affirming the many things on which they do already agree, and some on which they should be able to agree.

In particular that:

• they will give the strongest possible support for the WHO in leading the medical response internationally;
• they will be transparent and tell the truth to their peoples about the progress of the disease and the threat that it represents;
• they will work together and with the international financial institutions to provide businesses, particularly SMEs, and individuals whatever support they need to get through the immediate crisis and avoid long-term damage to the global economy; 
• they will ensure the financial facilities for crisis support to countries - whether at global or regional level - have whatever resources they need to support countries in difficulty;
• they will avoid new protectionist policies - whether in trade or finance;
• they commit not to forget the poor and vulnerable in society and those least able to look after themselves.

Such a statement could be made by G20 leaders, reflecting the group’s role since 2010 as the premier forum for international economic cooperation.

But it could be even more appropriate coming from the UN Security Council, recognising that COVID-19 is much more than an economic challenge; and also reflecting the practical fact, in a time when international travel is restricted, the UNSC has an existing mechanism in New York to negotiate and quickly agree such a statement.

A public statement by leading countries could do a great deal to help arrest a growing sense of powerlessness among citizens and loss of confidence among businesses worldwide as the virus spreads.

It could also set a new course for international political and economic cooperation, not just in relation to the virus, but also other global threats with potentially devastating consequences for economic growth and political stability in the coming years.

There were several notable achievements during last week’s Spring meetings. The Fund’s frank set of forecasts for world GDP growth are a grim but valuable reminder of the scale of the crisis we are facing, and the Fund’s richer members will finance a temporary suspension on payments to the IMF for 29 very poor countries.

Most importantly, a boost to the Fund’s main emergency facilities - the Rapid Credit Facility and the Rapid Financing Instrument - now makes $100bn of proper relief available to a wide range of countries. But the core problem is that the vast bulk of the Fund’s firepower is effectively inert.

This is because of the idea of 'conditionality', which underpins almost all of the IMF’s lending relationships with member states. Under normal circumstances, when the IMF is the last-resort lender to a country, it insists that the borrowing government tighten its belt and exercise restraint in public spending.

This helps to achieve three objectives. One is to stabilise the public debt burden, to ensure that the resources made available are not wasted. The second is to limit the whole economy’s need for foreign exchange, a shortage of which had prompted a country to seek IMF help in the first place. And the third is to ensure that the IMF can get repaid.

Role within the international monetary system

Since the IMF does not take any physical collateral from countries to whom it is lending, the belt-tightening helps to act as a kind of collateral for the IMF. It helps to maximise the probability that the IMF does not suffer losses on its own loan portfolio — losses that would have bad consequences for the Fund’s role within the international monetary system.

This is a perfectly respectable goal. Walter Bagehot, the legendary editor of The Economist, established modern conventional wisdom about managing panics. Relying on a medical metaphor that feels oddly relevant today, he said that a panic 'is a species of neuralgia, and according to the rules of science you must not starve it.' 

Managing a panic, therefore, requires lending to stricken borrowers 'whenever the security is good', as Bagehot put it. The IMF has had to invent its own form of collateral, and conditionality is the result. The problem, though, is that belt-tightening is a completely inappropriate approach to managing the current crisis.

Countries are stricken not because they have indulged in any irresponsible spending sprees that led to a shortage of foreign exchange, but because of a virus beyond their control. Indeed, it would seem almost grotesque for the Fund to ask countries to cut spending at a time when, if anything, more spending is needed to stop people dying or from falling into a permanent trap of unemployment.

The obvious solution to this problem would be to increase the amount of money that any country can access from the Fund’s emergency facilities well beyond the $100bn now available. But that kind of solution would quickly run up against the IMF’s collateral problem.

The more the IMF makes available as 'true' emergency financing with few or no strings attached, the more it begins to undermine the quality of its loan portfolio. And if the IMF’s senior creditor status is undermined, then an important building block of the international monetary system would be at risk.

One way out of this might have been an emergency allocation of Special Drawing Rights, a tool last used in 2009. This would credit member countries’ accounts with new, unconditional liquidity that could be exchanged for the five currencies that underpin the SDR: the dollar, the yen, the euro, sterling and the renminbi. That will not be happening, though, since the US is firmly opposed, for reasons bad and good.

So in the end the IMF and its shareholders face a huge problem. It either lends more money on easy terms without the 'collateral' of conditionality, at the expense of undermining its own balance sheet - or it remains, in systemic terms, on the sidelines of this crisis.

And since the legacy of this crisis will be some eye-watering increases in the public debt burdens of many emerging economies, the IMF’s struggle to find a way to administer its medicine will certainly outlive this round of the coronavirus outbreak.

This article is a version of a piece which was originally published in the Financial Times

There has been a stark contrast between messaging coming from the international community and trends on the ground as Libya’s latest bout of civil war enters its eighth month.

Led by Germany, some states have been trying to build consensus for a ceasefire ahead of a summit that is expected to be held in Berlin in the next few months. Today marks the date of one of the final planning meetings for the summit.

The increasing use of drone technology, airstrikes and further influxes of fighters trend points in the opposite direction. Warring groups in Libya continue to receive support from external states, undermining international efforts to de-escalate the conflict. A UN arms embargo goes largely unenforced. As the Berlin process unfolds, there is little evidence to suggest that these external states will shift their positions.

The launch of Field Marshal Khalifa Haftar’s Libyan Arab Armed Forces (LAAF) offensive on Tripoli in April sunk a UN-planned ‘national conference’, intended to be held less than two weeks later, to negotiate a framework for transition out of Libya’s governance crisis. Yet, Haftar has so far failed in his objective of capturing Tripoli. While his offensive continues, had he the capacity to capture the city, he would have done so already.

This has created a conundrum for peace talks: there appears to be little chance of negotiating a deal with Haftar, while it is also hard to see how a deal could be reached without him.

The field marshal has little interest in accepting a withdrawal, even a partial one, of his forces. His opponents – who have found unity in their shared efforts to defeat Haftar’s forces – will not accept a ceasefire that leaves the LAAF on the hinterlands of the capital. Similarly, a deal apparently agreed in Abu Dhabi between Haftar and Prime Minister Fayez al-Serraj in February is also dead in the water.

Amid this logjam, there has been an increasing interest in the economic content of the Berlin summit. Countries supportive of Haftar argue that his alliance has legitimate concerns over the management of Libya’s economy and, particularly, the dominant role of the Tripoli-based central bank and its governor in supporting armed groups.

For some within these countries, changing the leadership of the central bank and a finding means of limiting the dominance of the UN-backed Government of National Accord (GNA) over the state’s resources – thus reducing flows of funding to armed groups fighting Haftar – could present a point of agreement in Berlin.

But their focus on financial management in Tripoli is not mirrored by interest in holding the rival central bank in the eastern city of Bayda – an institution unrecognized by the international community – to account for its pursuit of its own monetary policy. This is built on approximately $23 billion of unsecured debt from commercial banks and $11 billion of currency supplied by Russia.

Indeed, very few of the conversations surrounding parameters for Berlin contain details of what would be asked of eastern-based actors beyond pursuit of an audit of the Tripoli and Bayda central banks (only the Tripoli bank is recognized by the international community).

Clearly, the GNA and its allies would have no incentive to accept provisions that limit their means to mobilize resources for the war while its opponents do not receive the same scrutiny. 

However, it is possible to capitalize on the broad interest in economic content to reach some points of agreement over the management of the economy and state institutions. Rather than seeking to replace individuals aligned with one faction for those aligned with another, or expecting asymmetrical concessions from the GNA and its allies, this effort must instead focus on structures and processes that exacerbate the conflict and represent major grievances for the warring parties.

Importantly, this would include the establishment of a system of transparency and accountability for the management of Libya’s finances.  The opacity of current processes enables the support of patronage-based networks with no effective oversight.

Linked to this, the development of effective processes for budgeting and allocating funds could help to reduce graft.

And, finally, rationalizing the role of state institutions to agree their roles and responsibilities, creating the room for reforms to Libya’s system of state employment and subsidies through provision of direct payments to Libyan citizens, is essential.  

An economic commission that comprises members from across political and institutional divides – receiving political support from international powers and technical support from international financial institutions – could be an effective approach. Such a commission could match an inclusive, Libyan-led process with international support to progressively harmonize economic and financial policy between rival authorities and develop consensus for a process of institutional reunification in Libya.

This would constitute a major element of an eventual political settlement and reduce the risk of a limited set of actors capturing the system at the expense of the others – an outcome which would likely result in future bouts of violence.

Such a commission would offer a means of addressing a key driver of the conflict by decentralizing aspects of Libya’s governance, moving away from the dominance of Tripoli and the current winner-take-all system. 

These issues cannot be put to one side, to follow progress on the security front. The remarkable resilience that Libya’s economy has shown over the last seven months should not be taken for granted. It has become increasingly difficult for Libya’s institutions to insulate themselves from the conflict as both sides seek to mobilize resources to sustain their war effort.

The LAAF is increasingly looking to sideline civilian authorities in eastern Libya. On the other side, the GNA has found means of routing funds to armed groups fighting Haftar.

In September, a dispute over the supply of jet fuel between the LAAF and the National Oil Corporation resulted in the establishment of a parallel Brega Petroleum Marketing Company, the state-owned company that possesses a monopoly over fuel distribution.

Meanwhile, other major problems lurk under the surface.  The banking sector is in an increasingly perilous state and debts continue to mount all around, with those in the east not accounted for by Tripoli’s official authorities.  

Through the establishment of an economic commission, the Berlin process provides an opportunity and – most importantly – a mechanism to address these problems while also helping to maintain the basic functionality of the state.  Even if a ceasefire deal does not materialize, initiating negotiations about the future shape of the state and its economy would be a significant step forward.

The transition of power in Oman from the deceased Sultan Qaboos to his cousin and the country’s new ruler, Sultan Haitham bin Tariq, has been smooth and quick, but the new sultan will soon find that he has a task in shoring up the country’s economic position.

Above all, the fiscal and debt profile of the country requires careful management. Fiscal discipline was rare for Oman even during the oil price spike of the 2000s. Although oil prices only collapsed in 2014, Oman has been registering a fiscal deficit since 2010, reaching a 20.6 per cent high in 2016. As long as fiscal deficits remain elevated, so will Oman’s need to finance those deficits, predominately by borrowing in the local and international market.

Oman’s Debt-to-GDP ratio has been rising at a worrying pace, from 4.9 per cent in 2014 to an IMF-estimated 59.8 per cent in 2019. By 2024, the IMF is forecasting the ratio to reach nearly 77 per cent. A study by the World Bank found that if the debt-to-GDP ratio in emerging markets exceeds 64 per cent for an extended period, it slows economic growth by as much as 2 per cent each year.

Investors are willing to lend to Oman, but the sultanate is paying for it in terms of higher spreads due to the underlying risk markets are placing on the rising debt profile of the country. For instance, Oman has a higher sovereign debt rating than Bahrain yet markets perceive it to be of higher risk, making it costlier to borrow. Failure to address the fiscal and debt situation also risks creating pressure on the country’s pegged currency.

If oil revenues remain low, Sultan Haitham will have to craft a daring strategy of diversification and private sector growth. He is well placed for this: Sultan Haitham headed Oman’s Vision 2040, which set out the country’s future development plans and aspirations, the first Gulf country to embark on such an assessment. However, like all vision documents in the Gulf, Oman’s challenge will be implementation.

In the age of climate change, renewable energy is a serious economic opportunity, which Oman has to keep pursuing. If cheap electricity is generated it could also be exported to other Gulf states and to south Asia. In Oman, the share of renewables in total electricity capacity was around 0.5 per cent in 2018; the ambition is to reach 10 per cent by 2025.

However, in order to reach this target, Oman would have to take additional measures such as enhancing its regulatory framework, introducing a transparent and gradual energy market pricing policy and integrating all stakeholders, including the private sector, into a wider national strategy.

Mining could provide another economic opportunity for Oman’s diversification efforts, with help from a more robust mining law passed last year. The country has large deposits of metals and industrial minerals and its mountains could have gold, palladium, zinc, rare earths and manganese.

Oman’s strategic location connecting the Gulf and Indian Ocean with east Africa and the Red Sea could also boost the country’s economy. The Duqm special economic zone, which is among the largest in the world, could become the commercial thread between Oman, south Asia and China’s ‘Belt and Road Initiative.’

Oman has taken important steps to make its economy more competitive and conducive to foreign direct investment. Incentives include a five-year renewable tax holiday, subsidized plant facilities and utilities, and custom duties relief on equipment and raw materials for the first 10 years of a firm’s operation in Oman.

A private sector economic model that embraces small- and medium-sized enterprises as well as greater competition and entrepreneurship would help increase opportunities in Oman. Like all other Gulf economies, future employment in Oman will have to be driven be the private sector, as there is little space left to grow the public sector.

Privatization needs to continue. Last year’s successful sale of 49 per cent of the electricity transmission company to China’s State Grid is a very positive step. The electricity distribution company as well as Oman Oil are next in line for some form of partial privatization.

The next decade will require Oman to be even more adept in its competitiveness as the region itself tries to find its new bearings. Take tourism for instance; Oman hopes to double its contribution to GDP from around 3 per cent today to 6 per cent by 2040 and the industry is expected to generate half a million jobs by then. Over the next 20 years, Oman will most likely be facing stiff competition in this area not only by the UAE but by Saudi Arabia as well.

The new sultan has an opportunity to embark on deeper economic reforms that could bring higher growth, employment opportunities and a sustainable future. But he has a big task.

Chatham House is pleased to announce the nominees for the 2015 Chatham House Prize. 

The nominees are: 

• Mahamadou Issoufou, President of the Republic of Niger
• Médecins Sans Frontières
• Angela Merkel, Chancellor of the Federal Republic of Germany
• Juan Manuel Santos, President of the Republic of Colombia 

The Chatham House Prize is awarded to the person or organization deemed to have made the most significant contribution to the improvement of international relations in the previous year. 

The winner will be announced later this year and an award ceremony will take place in the autumn. 

More about the 2015 nominees 

About the Chatham House Prize 

The selection proceed for the nominees draws on the expertise of Chatham House's research teams and three presidents - Lord Ashdown, Sir John Major and Baroness Scotland. Our members are then invited to vote for the winner in a ballot. The winner will be announced later this year. 

The winner will receive a crystal award and a scroll signed by our Patron, Her Majesty the Queen. An award ceremony will take place in London with keynote speeches by leading figures in international affairs. 

Previous winners include: Melinda Gates (2014); Hillary Rodham Clinton, former US Secretary of State (2013); Sheikh Rached Ghannouchi, Head of the Ennahdha movement, Tunisia and Dr Moncef Marzouki, President of Tunisia (2012); Aung San Suu Kyi, Burmese democracy campaigner (2011); HE Abdullah Gül, President of Turkey (2010), HE President Luiz Inácio Lula da Silva of Brazil (2009), President John Kufuor of Ghana (2008), HH Sheikha Mozah, Chairperson, Qatar Foundation (2007), HE Joaquim Chissano, former President of Mozambique (2006) and HE President Victor Yushchenko of Ukraine (2005). 

More about the Prize and previous winners

The global health system has contributed significantly to improved health and life expectancy in recent decades. However, the existing architecture needs to be reformed in order to address future challenges and meet the health targets in the Sustainable Development Goals. Rethinking the Global Health System, a new Chatham House report, analyses how fit for purpose the current system is and identifies priority areas for reform. 

The Ebola crisis has shown that weak systems make individual countries more vulnerable and that strong, resilient and equitable systems at country level are needed to protect global health security. There is a pressing need for enhanced global disease surveillance and detection capacity, as well as improved international coordination in responding to emerging health threats.

In addition, addressing determinants of health outside the health sector requires cross-sectoral collaboration and linkages to other policy domains. Historically, the focus has rested on directly reducing illness and death, but the need to address other influences on health outcomes – safe drinking water, proper sewage treatment, good education – is now well recognized.

The report says that stronger leadership in global health is therefore required and the report lends support to calls for the creation of a new organization that would bring together United Nations agencies with health-related mandates – UN-HEALTH. Just as UNAIDS created a more coherent response for HIV, a UN-HEALTH organization could achieve a similar but more wide-reaching effect by bringing together and streamlining all UN agencies working on global health issues.

Professor David Harper, who led the Chatham House project that resulted in the report, said: 

'This report is intended to make a substantial contribution to the international debate on what the world will require of the health architecture of the future. It offers some options for political leaders to consider, but it is just a starting point. More work is urgently needed to develop the ideas introduced in this project and to help generate the high-level political traction that is so vital in any change process.'

Revenues for pharmaceutical companies need to be 'delinked' from sales of antibiotics to avoid their over-use and avert a public health crisis, says a new report from the think-tank Chatham House.

Over-use of antibiotics is contributing to the growing resistance of potentially deadly bacteria to existing drugs, threatening a public health crisis in the near future. The report notes that, by 2050, failing to tackle antibiotic resistance could result in 10 million premature deaths per year.                                       

Novel antibiotics to combat resistant pathogens are thus desperately needed, but market incentives are exacerbating the problem. Towards a New Global Business Model for Antibiotics: Delinking Revenues from Sales states that,                                       

'The current business model requires high levels of antibiotic use in order to recover the costs of R&D. But mitigating the spread of resistance demands just the opposite: restrictions on the use of antibiotics.'

To tackle this catch-22 problem, the Centre on Global Health Security at Chatham House recommends the establishment of a global body to implement a radical new business model for the industry, which would encourage investment and promote global access to - and conservation of - antibiotics.      

The current business model has several perverse effects. As R&D is an inherently risky and costly endeavour, the industry is chronically under-investing in new treatments. Today, few large pharmaceutical companies retain active antibacterial drug discovery programmes. Re-stoking the industry's interest in antibiotics would be one of the primary roles of the new body.   

Secondly, the need to recover sunk cost under the current business model encourages both high prices and over-marketing of successful drugs, making potentially life-saving treatments unaffordable to many in developing countries, while simultaneously encouraging over-use in developed markets and increasing resistance.   

The new global body would address these challenges by ‘delinking’ pharmaceutical revenues from sales of antibiotics. It would do this by directly financing the research and development of new drugs, which it would then acquire at a price based on production costs rather than the recovery of R&D expenses. Acquisition could take the form of procurement contracts with companies, the purchase of full IP rights or other licensing mechanisms.                                       

This would enable it to promote global access to antibiotics while simultaneously restricting over-use. Conservation would be promoted through education, regulation and good clinical practice, with the report recommending that 'proven conservation methods such as antibiotic stewardship programmes… be incentivized and implemented immediately.'

Priorities for R&D financing would be based on a comprehensive assessment of  threats arising from resistance. Antibiotics would qualify for the highest level of financial incentives if they combat resistant pathogens posing a serious threat to human health.                                       

Finance for the new body would come from individual nation states, with the report noting that this could 'begin with a core group of countries with significant research activity and large antibiotic markets, (though) it is envisaged that all high income countries should make an appropriate financial contribution.'                                 

It is not yet clear exactly how much funding would be necessary to combat resistance, but with inaction expected to cost $100 trillion in cumulative economic damage, the report argues that 'an additional global investment of up to $3.5 billion a year (about 10 per cent of the current value of global sales of antibiotics) would be a bargain.'

The nominees are:

• Laurent Fabius & Christiana Figueres: nominated for their pivotal role in delivering a global climate agreement at the COP 21 meeting in Paris in December 2015.
• Attahiru Muhammadu Jega: nominated for his professionalism, determination and integrity as chairman of Nigeria’s electoral commission, which, in 2015, ensured the conduct of Nigeria’s most credible election since the country’s return to civilian rule in 1999.
• John Kerry & Mohammad Javad Zarif: nominated for their crucial roles, throughout 2015, in successfully negotiating the historic nuclear deal between Iran and the P5+1.

The Chatham House Prize is awarded to the person, persons or organization deemed to have made the most significant contribution to the improvement of international relations in the previous year.

The winner will be announced later this year and an award ceremony will take place in the autumn.

More about the 2016 nominees

More about the Prize and previous winners

The Chatham House Prize is awarded to the person, persons or organization deemed to have made the most significant contribution to the improvement of international relations in the previous year.

The nominees are:

• Charlotte Osei, Chairperson of the Electoral Commission of Ghana: nominated for ensuring a peaceful and transparent electoral process in Ghana in December 2016, further consolidating Ghana’s 24-year long democratic journey.
• Juan Manuel Santos, President of Colombia: nominated for formally ratifying a peace agreement with the FARC rebel group and bringing an end to the war in Colombia.
• Jens Stoltenberg, Secretary-General of NATO: nominated for steering NATO through one of the most complicated periods in its recent history.

The winner will be announced later this year, and an award ceremony will take place in the autumn.

More about the 2017 nominees

More about the Prize and previous winners

While trade and tax remain at the heart of the difficult economic conversations between Europe and the US, a new issue has emerged as a potential source of even greater friction: data.

Growth in the traditional global trade in goods and services has levelled off, but cross-border data flows continue to expand rapidly and the challenges of developing policies that protect privacy, security and innovation are already tremendous. For example, data analytics are driving dramatic productivity gains in industry, particularly for large and complex installations whose safety and efficiency will increasingly depend on flows of those data across jurisdictions. Meanwhile, ‘fintech’ (financial technology) start-ups and large banks alike are testing new modes of accumulating, analysing and deploying customer data to provide less expensive services and manage the risk profile of their businesses.

The rules that govern the collection, transmission and storage of data are perhaps one of the more surprising controversies in the transatlantic relationship. Similar liberal democracies with similar geostrategic interests might be expected to approach the handling of personal, corporate and government data in more or less the same way. And yet the US and its key European partners have struck different balances in the trade-offs between national security and citizens’ rights, between freedom of expression and personal privacy, and between free enterprise and market regulation.

While the US debate on the use of data has often been framed around the trade-off between national security and personal privacy, Europeans often face an even more complex set of concerns that include worries that their digital and technology firms lag behind dominant US competitors. The political and regulatory uncertainty helps neither side, and leaves transatlantic companies struggling to comply with uncertain and conflicting rules in different jurisdictions.

This makes more determined efforts by US and European policymakers to agree basic principles that will guide the usage and protection of personal and commercial data all the more important. While common regulations or even greater alignment among regulators seem out of reach, a ‘Transatlantic Charter for Data Security and Mobility’ would provide a set of principles for more specific rules amid political landscapes and technological developments that are evolving rapidly. It could also provide the basis for firms, whether in manufacturing or financial services or health care, to draft their own voluntary standards on how they protect data even as they develop new algorithms that improve productivity, safety and customer satisfaction.

Embarrassing leaks, careful denials and endless lawsuits will continue to shape the awkward efforts of policymakers to find common ground around issues like cyberespionage, defence of common networks and the sharing of personal data with law enforcement. Cyberattacks with the aim of disrupting government operations or influencing election campaigns will add still further pressures. These will all serve as a noisy backdrop to a related but separate debate over how commercial firms should exploit the opportunities of global networks and ‘big data’ analytics while protecting national interests and privacy.

Yet, setting common guidelines for commercial data transmission and storage remains crucial both to protect the goods and services that already depend on sophisticated data-gathering and analysis, and to support the next generation of productivity gains and business opportunities.

Global firms yearn for clarity and predictability as they organize themselves to make the most of the data revolution. Neither is likely to become a reality soon. The EU’s new General Data Protection Regulation will take effect in 2018, but its implementation will inevitably be coloured by the fact that American firms currently dominate the information technology business. Last year’s ‘Privacy Shield’ agreement between the US and the EU renews the permission for firms with transatlantic business interests to transfer data, subject to compliance with basic standards of protection, but the agreement remains vulnerable to European court challenges. Britain’s decision to leave the EU adds a further complication, as it establishes its own set of data protection rules that may not easily align with either European or US requirements. Meanwhile, the World Trade Organization continues to debate new rules for digital trade, even as markets like China, Russia and Brazil make up their own.

If this ‘Transatlantic Charter for Data Security and Mobility’ were adopted bilaterally, say as part of the annual reviews of the US–EU Privacy Shield agreement, it could form the basis for broader cooperation on these issues, helping to drive progress in the G7 and G20 and ultimately perhaps in trade agreements under the WTO. It would hardly secure complete alignment on these questions, but it could help establish the framework for a debate that all too often lurches to extremes and risks damaging a fundamental alliance for global stability – along with a fundamental driver of 21st-century economic progress.

To comment on this article, please contact Chatham House Feedback

The Review on Antimicrobial Resistance, chaired by Jim O’Neill, was commissioned by former UK prime minister, David Cameron, in July 2014. Supported by the UK government and the Wellcome Trust, the final report of the review was published in May 2016 and has had a global impact in terms of motivating political leaders and decision-makers to take more seriously the threat posed by antimicrobial resistance.

Yet there is now a perception that the political momentum to address the issue is waning and needs to be reinvigorated.

In a further report produced by Chatham House, the progress of the recommendations of the review is assessed and the key ways to move forward are identified.

Panellists at this event, where highlights of the report are presented, provide their assessment of the progress so far and discuss priorities for future action.

The report was funded by Wellcome.

Linked to the call for a global response to the Covid-19 pandemic that I, Robin Niblett and Creon Butler have outlined, the case for a specific dramatic economic policy gesture from many policymakers in large economies is prescient.

It may not be warranted from all G20 nations, although given the uncertainties, and the desire to show collective initiative, I think it should be G20 driven and inclusive.

We need some sort of income support for all our citizens, whether employees or employers. Perhaps one might call it a truly People’s QE (quantitative easing).

Against the background of the previous economic crisis from 2008, and the apparent difficulties that more traditional forms of economic stimulus have faced in trying to help their economies and their people - especially against a background of low wage growth, and both actual, and perception of rising inequality - other ideas have emerged.

Central banks printing money

Both modern monetary theory (MMT) and universal basic income (UBI) essentially owe their roots to the judgement that conventional economic policies have not been helping.

At the core of these views is the notion of giving money to people, especially lower income people, directly paid for by our central banks printing money. Until recently, I found myself having very little sympathy with these views but, as a result of COVID-19, I have changed my mind.

This crisis is extraordinary in so far as it is both a colossal demand shock and an even bigger colossal supply shock. The crisis epicentre has shifted from China - and perhaps the rest of Asia - to Europe and the United States. We cannot expect policies, however unconventional by modern times, such as the dramatic monetary steps announced by the Federal Reserve Board and others like it, to put a floor under this crisis.

We are consciously asking our people to stop going out, stop travelling, not go to their offices - in essence, curtailing all forms of normal economic life. The only ones not impacted are those who entirely work through cyberspace. But even they have to buy some forms of consumer goods such as food and, even if they order online, someone has to deliver it.

As a result, markets are, correctly, worrying about a collapse of economic activity and, with it, a collapse of companies, not just their earnings. Expansion of central bank balance sheets is not going to do anything to help that, unless it is just banks we are again worried about saving.

What is needed in current circumstances, are steps to make each of us believe with high confidence that, if we take the advice from our medical experts, especially if we self-isolate and deliberately restrict our personal incomes, then we will have this made good by our governments. In essence, we need smart, persuasive People’s QE.

Having discussed the idea with a couple of economic experts, there are considerable difficulties with moving beyond the simple concept. In the US for example, I believe the Federal Reserve is legally constrained from pursuing a direct transfer of cash to individuals or companies, and this may be true elsewhere.

But this is easily surmounted by fiscal authorities issuing a special bond, the proceeds of which could be transferred to individuals and business owners. And central banks could easily finance such bonds.

It is also the case that such a step would encroach on the perception and actuality of central bank independence, but I would be among those that argue central banks can only operate this independence if done wisely. Others will argue that, in the spirit of the equality debate, any income support should be targeted towards those on very low incomes, while higher earners or large businesses, shouldn’t be given any, or very little.

I can sympathise with such spirit, but this also ignores the centrality of this particular economic shock. All of our cafes and restaurants, and many of our airlines, and such are at genuine risk of not being able to survive, and these organisations are considerable employers of people on income.

It is also the case that time is of the essence, and we need our policymakers to act as soon as possible, otherwise the transmission mechanisms, including those about the permanent operation of our post World War 2 form of life may be challenged.

We need some kind of smart People’s QE now.

The measures taken to limit the spread of the coronavirus - in particular social distancing -  come with significant economic costs, as the drop both in demand for goods and services and in supply due to workers being at home sick will create a short-term economic shock not seen in modern times.

Sectors that are usually less affected by regular economic swings such as transport and tourism are being confronted with an almost total collapse in demand. In the airline sector, companies are warning they might only be able to hold out for a few months more.

Building on the calls to provide income support to all citizens and shore up businesses, European leaders should now be giving explicit permission to the European Central Bank (ECB) to provide whatever financial support is needed.

Although political leaders have responded to the economic threat, the measures announced across the continent have mainly been to support businesses. The crisis is broader and deeper than the current response.

Support for weaker governments

The ECB already reacted to COVID-19 by announcing measures to support the banking system, which is important to guarantee the continuity of the European financial system and to ensure financially weaker European governments do not have to confront a failing banking system as well.

Although government-subsidised reduced working hours and sick pay are a solution for many businesses and workers, crucially they are not for those working on temporary contracts or the self-employed. They need direct income support.

This might come down to instituting something that looks like a universal basic income (UBI), and ensuring money keeps flowing through the economy as much as possible to help avoid a cascade of defaults and significant long-term damage.

But while this is likely to be the most effective remedy to limit the medium-term impact on the economy, it is particularly costly. Just as an indication, total compensation of employees was on average around €470bn per month in the eurozone last year.

Attempting to target payments using existing welfare payment channels would reduce costs, but is difficult to implement and runs the risk of many households and businesses in need missing out.

The increase in spending and lost revenue associated with these support measures dwarf the fiscal response to the 2008-09 financial crisis. The eurozone economy could contract by close to 10% this year and budget deficits are likely be in double digits throughout the bloc.

The European Commission has already stated member states are free to spend whatever is necessary to combat the crisis, which is not surprising given the Stability and Growth Pact - which includes the fiscal rules - allows for such eventualities.

Several eurozone countries do probably have the fiscal space to deal with this. Countries such as Germany and the Netherlands have run several years of balanced budgets recently and significantly decreased their debt levels. For countries such as Italy, and even France, it is a different story and the combination of much higher spending and a collapse in tax revenue is more likely to lead to questions in the market over the sustainability of their debt levels. In order to avoid this, the Covid-19 response must be financed collectively.

The Eurogroup could decide to use the European Stability Mechanism (ESM) to provide states with the funds, while suitably ditching the political conditionality that came with previous bailout. But the ESM currently has €410bn in remaining lending capacity, which is unlikely to be enough and difficult to rapidly increase.

So this leaves the ECB to pick up the tab of national governments’ increase in spending, as the only institution with effectively unlimited monetary firepower. But a collective EU response is complicated by the common currency, and particularly by the role of the ECB.

The ECB can’t just do whatever it likes and is limited more than other major central banks in its room for manoeuvre. It does have a programme to buy government bonds but this relies on countries agreeing to a rescue programme within the context of the ESM, with all the resulting political difficulties.

There are two main ways that the ECB could finance the response to the crisis. First, it could buy up more or all bonds issued by the member states. A first step in this direction would be to scrap the limits on the bonds it can buy. Through self-imposed rules, the ECB can only buy up to a third of every country’s outstanding public debt. There are good reasons for this in normal times, but these are not normal times. With the political blessing of the European Council, the Eurosystem of central banks could then start buying bonds issued by governments to finance whatever expenditure they deem necessary to combat the crisis.

Secondly, essentially give governments an overdraft with the ECB or the national central banks. Although a central bank lending directly to governments is outlawed by the European treaties, the COVID-19 crisis means these rules should be temporarily suspended by the European Council.

Back in 2012, the then president of the ECB, Mario Draghi, proclaimed the ECB would do whatever it takes, within its mandate, to save the euro, which was widely seen as a crucial step towards solving the eurozone crisis. The time is now right for eurozone political leaders to explicitly tell the ECB that together they can do whatever it takes to save the eurozone economy through direct support for businesses and households.