The government has done well in offering additional support across the board to businesses, employees and many others affected by the COVID-19 pandemic.
One area which the government could further tackle is the question of alleviating the burden of interest and capital payments faced by businesses.
Many banks have done the right thing by agreeing to grant interest or capital moratoria to their personal borrowing clients, but we should be looking at doing so on a national scale for businesses, ensuring there is an additional standard safety net in place in doing so.
The way to go about doing this must be inclusive and in the interest of everybody – we should aim for a situation where there is the least possible suffering spread across all those involved, so as to maintain the health of the entire system.
Businesses who have lost their clients will be unable to keep up with their obligations and people who have lost their jobs will not be able to pay their mortgages. During this crisis, even with current measures, businesses are still expected to keep up interest repayments due on outstanding capital amounts.
Although regular amounts paid out are set to be reduced, these payments are still a burden to our businesses, which may force them to borrow more to service the debt on which interest is being charged.
By paying the interest on behalf of the businesses, it is also the banks that are protected
The goal must therefore be to relieve pressure on the businesses for the entire duration of the crisis without sacrificing the banks.
All loans must be deferred until the crisis passes and capital payments put on a longer term moratorium than just a couple of months. By offering a moratorium on capital throughout the crisis, the level of debt remains the same.
The government must step in to cover the interest payments in the meantime, while ideally obtaining the money through measures being put in place by the European Central Bank.
By paying the interest on behalf of the businesses, it is also the banks that are protected, which will safely keep on paying their taxes.
The amount would be quantified as a bond in favour of government at the same cost of borrowing from European support mechanisms such as the measures being taken out by the European Central Bank.
Then, the annual payment of the COVID-19 bond issued by businesses to government could be used as a tax deductible expense over future years, thereby helping the businesses through the crisis over time.
Such additional measures are crucial when we consider that there is still substantial risk to many businesses even after the government’s recent promises, and therefore jobs and the long term health of our economy remain at risk.
We must not be blind to the specific challenges faced by individual enterprises and cannot expect catch-all solutions to work for everybody.
That is also why we must look at particular case studies and maintain an ongoing dialogue between the government and businesses.
Some businesses hold loans with foreign banks and their success depends on how they connect to other SMEs and partners abroad.
By including loans taken by local companies with foreign entities into consideration, we will not exclude anyone and therefore, more effectively, protect jobs.
Many enterprises may collapse without the necessary attention to detail being given to their particular struggles and difficulties.
A wide net will mitigate a lot of the damage, but we also require the government to look at particular case studies and offer appropriate assistance tailored to specific problems.
At the same time, we have to keep seeing what adjustments we can make in the big picture to ensure there are no oversights, loopholes or missed opportunities.
Timothy Alden, Interim leader, Democratic Party