The Covid-19 emergency has literally upset our daily lives, revolutionising our habits and limiting our individual freedoms, which we are fully appreciating now that we are being denied them. In this difficult time, the health situation is undoubtedly at the top of everybody’s priority, but we must consider that the economic sphere is also of fundamental importance for a correct analysis of the period we are facing.
The drastic but probably inevitable measures adopted by the government through the issuing of several Prime Minister’s Decrees through the month of March have hit hard on the Italian economy, and even harder will be the recovery that our country will have to work on in the course of the next few months. The consequences generated by the spreading of Covid-19 have reached global proportions too, devastating the international markets like a tsunami sweeping away billions of capitals, with all major stock exchanges registering double-digit losses (the Italian stock value dropped 16,9% on last 12th March, the highest-ever drop in a single session). The situation has been compared to the subprime lending crisis and the collapse of Lehman Brothers in September 2008. But while in 2008 we found ourselves facing an exclusively financial crisis, the concern is now for the manufacturing sector, the so-called ‘real economy’, victims of the forced lockdown imposed by the various national governments, which are following a more and more shared line of action characterised by the total suspension of activities not considered ‘essential’ for the common good.
The risk of a pandemic able to progress very rapidly, quickly spreading intercontinentally to the point of undermining the national health systems, had already been taken into consideration by a supranational financial institution though: the World Bank.
The World Bank is a financial organisation based in Washington that has as its objectives the elimination of extreme poverty and the promotion of an economic growth shared at global level, with particular attention to developing countries. It operates as an actual cooperative participated in by 189 countries, and in June 2017 it had already launched on the market bonds specifically designed to face a potential pandemic, the so-called ‘Pandemic Bonds’. These bonds represent an actual insurance against a health emergency deriving from a pandemic, and support the Pandemic Emergency Financing Facility (PEF), an organisational activity promoted by the World Bank itself, in charge of channelling the funds the various countries need to face the emergency.
In elaborating its collateral strategy, the PEF had considered the six viruses representing the greatest threat of a pandemic, among which is the family of the Coronaviridae (which include for example the viruses responsible for the recent epidemics of SARS and MERS, and the present Covid-19 emergency). The funds will be destined to countries experiencing a certain level of contagion and number of deaths, and meeting other parameters with respect to the speed of the contagion itself and the crossing of national borders. This specific and detailed information is publicly available from the report published by the World Health Organisation (WHO). The necessary condition for the release of the funds is the declaration of a pandemic, officially communicated on 11th March 2020, but the mechanisms initiating the cuts in the refund of the bonds to the investors are so complex that a specific society – the American Air Worldwide Corporation – needs to certify them.
Looking at the specifics, we see that two different types of bonds were issued: Class A bonds, for a total of 225 million dollars, directly related to flu and Coronaviridae pandemics, paying an interest rate of 7,50%, and Class B bonds, for 95 million dollars, covering a greater risk (e.g. Filoviridae, Lassa fever, Rift Valley fever and Crimean-Congo hemorrhagic fever) and therefore guaranteeing the much higher interest rate of 12,10%. Both types of bonds are due to expire on 15th July 2020 and will be reimbursed to the investors only in case none of the relevant events will have happened by this date. We can therefore notice how investors who chose to buy these financial products were set to make a substantial profit, in relation to an equally high risk though. A risk that in the last few weeks has clearly materialised, delineating a scenario getting more and more dramatic by the day.
We have seen as an international institution like the World Bank had already activated precautionary measures to try to deal with situations of extreme emergency like the one we are experiencing at the moment, but the current scenario also and most importantly requires strong and decisive actions by the representatives of the various countries. Today as never before we feel we need brave choices shared at European level: this is the only way we will be able to resume our lives and hope for a full recovery, which will inevitably take a long time.
The European Union has been presented with the first true opportunity to show its unity: if we are actually fighting a war, although against an invisible enemy, there’s never been a better moment to definitely eliminate boundaries and the cultural, economic and linguistic differences that have often created irreconcilable divides even between members of the same society.
“We are all on the same boat, so we have to row together”, to quote Pope Francis during his solitary address from Saint Peter’s Square: our political representatives, our doctors and health care personnel who keep operating in first line in conditions endangering their own wellbeing, all those who continue their activities in order to provide us with ‘essential services’, but also the rest of us, kept in ‘viral arrest’ by the quarantine.
We are all called to give our contribution, so that the “we’ll come out of this stronger than ever” won’t be only a slogan, but the foundation on which to build a rosy future.
This way, yes, we’ll be able to see the stars again.