We must vaccinate the world — now

The cost of jabs for all would be a rounding error; it is also the only way to end the pandemic for good

Martin Wolf

© James Ferguson

The world economy is recovering from the depths of the Covid-19 crisis. 

But that crisis will not depart for good until the pandemic is under control. 

Since the virus knows no frontiers, it cannot be under control anywhere unless it is under control everywhere. 

The alternative is for us to remain inside national prisons indefinitely. 

Alas, that is what we risk if leaders do not raise their gaze from their own countries.

In its January World Economic Outlook Update, the IMF projected global economic growth at 5.5 per cent this year and 4.2 per cent in 2022. Moreover, its “2021 forecast is revised up 0.3 percentage point relative to the previous forecast”. The global contraction in 2020 is also now thought to have been 0.9 percentage points less than previously expected. Still, it was the worst recession since the second world war and had especially devastating effects on women, the young, the poor, people employed informally and those working in contact-intensive sectors.

Losses relative to pre-pandemic expectations are large and likely to prove permanent. They will turn out to be a form of “long economic Covid”. As the World Bank’s Global Economic Prospects report notes, this is partly due to the damage done to investment and human capital. It is also due to the combination of pre-existing economic weaknesses with increased fragilities, especially the big jump in debt. 

One of the report’s chapters is entitled, “Heading into a Decade of Disappointment”. 

That is plausible and disturbing.

A precondition for limiting long-term economic and social damage is bringing the virus under control. 

Only then can we hope to return to normal life. 

Indeed, no event since the second world war has better demonstrated the limits of national autonomy. 

A recent paper published by the National Bureau of Economic Research argues that “up to 49 per cent of the global economic costs of the pandemic in 2021” will be borne by advanced economies even if they achieve universal vaccination at home. 

This is due to the networks of production and trade that bind countries together. 

No economy is an island.

As Tedros Adhanom Ghebreyesus, director-general of the World Health Organization, has argued, “vaccine nationalism harms everyone and protects no one”. 

Moreover, the costs of an inward-looking policy of “health in one country” are not just narrowly economic. 

It also implies long-term limits on cross-border travel for all purposes.

More important still, it increases epidemiological risk. 

The more widespread the virus, the greater is the likelihood of harmful mutations. 

Already, the arrival of such mutations suggests the need for a long-term effort to adapt the vaccines, quite apart from developing better treatments. 

Covid-19, it is increasingly clear, will be a long haul.

It must also be a global haul. 

Yet a cursory glance at global vaccination rates shows there is instead a race to vaccinate local populations, with wealthy countries well in the lead. 

Among large rich countries, the UK is currently ahead, with 19.2 doses administered per 100 residents. 

The global figure is just 1.7 doses.

This outcome may have been inevitable given political pressures — even though, as many argue, it would be better to vaccinate the vulnerable and the most significant workers (such as teachers) everywhere, before moving on to the less vulnerable and significant anywhere.

Yet what was not inevitable was the gross underfunding of the effort to produce and distribute vaccines for the world.

As things stand, Covax — the effort to make and distribute vaccines globally — hopes to deliver 2.3bn doses this year. 

But even that would cover only about a fifth of its target population, far too few to achieve herd immunity. 

Planned supplies are also heavily backloaded this year. 

The bulk of the necessary vaccinations will now happen in 2022 and 2023. 

That is far too late. 

Indeed, already by next year, it may be vital to revaccinate early recipients with modified vaccines.

Money is a crucial issue. 

At the end of last year, the Covax Advance Market Commitment, which buys doses in advance for poor countries, had $2.4bn. 

With promises made since then, it needs another $2bn to pay for doses due just this year. 

The total vaccination effort will probably cost $35bn and more with the likely need for regular revaccination. It will cost still more if an effort is made to accelerate vaccine production and distribution this year. 

Moreover, the ACT (Access to COVID-19 Tools) Accelerator — of which Covax is a part, but which also includes treatment and testing — has a $27.2bn funding gap today and will need more again in future.

According to the IMF, advanced economies have already announced $5.6tn in extra fiscal spending in response to Covid-19. And that is only a part of the total fiscal cost. 

The money needed today by the ACT Accelerator is just 0.5 per cent of this sum. 

Even if the money needed to accelerate vaccine production and distribution for global use were to be $100bn, that would be an error term compared with the pandemic’s fiscal costs, let alone the huge health and other costs it has imposed.

Scientists have achieved miracles with the vaccines. 

Now the world’s leaders have just to show elementary common sense. 

They must do “whatever it takes” to finance accelerated production and distribution of vaccines — and, if necessary, reformulated vaccines — globally.

This is the only way for us to regain any sort of normality. 

Nothing should be allowed to get in the way. 

This is a global war and our species is not yet winning. 

That has to change, from tomorrow.

Global government bonds hit by fresh wave of selling

US 10-year Treasury yield jumps above 1.4% for first time since start of Covid crisis

Robin Wigglesworth

The bond markets sell-off has begun to ripple through equities markets © FT montage; AP/NYSE

The global government bond sell-off deepened on Wednesday, with the 10-year US Treasury yield jumping above 1.4 per cent for the first time since the start of the coronavirus crisis.

European government bonds were also caught-up in Wednesday’s selling, sending yields on British, French, German and Italian bonds rising. The drop in prices is the latest leg of a broad shift away from government debt that has been driven by a more upbeat global economic outlook and rising concerns over inflation.

The 10-year Treasury yield rose as much as 0.09 percentage points on Wednesday to reach 1.4337 per cent, having started the year at around 0.9 per cent. Longer-term Treasuries faced more intense selling since they are more vulnerable to changes in inflation expectations.

The global bond market is suffering its worst start to a year since 2015 as investors grow increasingly confident that the rollout of Covid-19 vaccines will boost economic growth and fan serious inflationary pressures for the first time in decades.

“We may finally once again be on the road to reflation,” said Ed Yardeni of Yardeni Research. “I’m seeing more and more signs of mounting inflationary pressures as a result of the unprecedented stimulus that fiscal and monetary policymakers are providing in response to the pandemic.”

The Bloomberg Barclays Multiverse index tracking $70tn worth of debt has lost about 1.9 per cent since the end of last year, in total return terms that account for price changes and interest payments. If sustained, this would be the worst quarterly performance since mid-2018 and the sharpest first-quarter setback for the broad fixed income gauge in six years.

Germany’s 10-year Bund yield has risen from minus 0.62 per cent in mid-December to 0.29 per cent on Wednesday. Australia’s 10-year bond yield has already surpassed its pre-pandemic level and climbed another 0.05 percentage points on Wednesday to hit 1.61 per cent, while Japan’s this week poked above 0.1 per cent for the first time since 2018.

The bond market reversal started gathering steam in January, when the Democrats won control of the US Senate and raised the prospect of a more forceful stimulus package to heal the damage caused by the pandemic. 

But the sell-off has accelerated and broadened markedly in recent weeks, as some analysts and investors have grown more optimistic about the economic outlook and questioned whether central banks will continue to keep monetary policy accommodative.

The fixed income sell-off has started to ripple through global equities, and led some analysts to predict a repeat of past battles between bond markets and spendthrift governments and central banks.

Yardeni was the Wall Street analyst who was the first to coin the expression “bond vigilantes” in the early 1980s to describe how fixed income markets occasionally bullied governments and central banks into more austere policies. He now reckons they may be making a comeback. 

“The bond vigilantes seem to be saddling up and getting ready to ambush the policymakers on the road to reflation,” he wrote in a note to clients on Tuesday. “It could be a heck of a shootout.”

Analysts say historically low bond yields have been a key fuel for the broad-based and dramatic rally across financial markets since the nadir in March 2020. Stocks are already showing signs that the pick-up in yields is biting.

Stock markets started 2021 on a tear, but the FTSE All-World Index has now dipped 2.5 per cent since hitting a record high on February 16. The technology-heavy Nasdaq 100 index has now declined more than 6 per cent since its peak last week. 

Gregory Peters, a senior fund manager at PGIM Fixed Income, said the moves were reminiscent of a “mini taper tantrum 2.0”, a reference to when the Federal Reserve’s announcement in 2013 that it would curtail its bond-buying programme rattled global financial markets. 

“The move higher is starting to spook other markets,” Peters said. “Stocks are squishy, and corporate bonds are squishy . . . It’s causing people to freak out a little.”

He suspects that the severity of the bond market sell-off may be getting overdone, but is — for now — wary of betting on the rout fizzling out. 

“When you’re staring down the barrel of double-digit GDP growth data, stimulus as far as the eye can see, and central banks on hold, you’d have to be brave to step in front of this,” he said.

The challenge is that central banks have committed to keeping monetary policy exceptionally easy even if inflation does accelerate — a commitment that some traders are now beginning to test. 

Central banks appear to be growing perturbed at the sell-off, which has the potential to pump up lending rates at a delicate time for the global economy. 

The Reserve Bank of Australia restarted its bond purchases this week to quell the rise in its government bond yields, and European Central Bank president Christine Lagarde on Monday said that policymakers were “closely monitoring” the situation. 

Fed chair Jay Powell on Tuesday hailed signs that the economic outlook was improving, but stressed that the US central bank would continue to stimulate demand for the foreseeable future, and argued that stubbornly low inflation was still a greater danger than a durable acceleration. 

“The economy is a long way from our employment and inflation goals, and it is likely to take some time for substantial further progress to be achieved,” Powell said in a prepared speech to Congress. 

“We will continue to clearly communicate our assessment of progress toward our goals well in advance of any change in the pace of purchases.” 

The age of the wheelie-bag

What will travel look like after the pandemic?

Covid-19 has brought international travel to a standstill. But it will recover and may even become a better experience, says Simon Wright

Luggage unpacks how international travel has changed down the ages. 

Adventurers in the 15th-century age of discovery set sail in galleons loaded to the gunwales with supplies for voyages that might take years. 

Aristocrats on a “grand tour” in the 18th century trekked around Europe for months in horse-drawn carriages packed with trunks, servants and even furniture. 

The suitcase arrived at the end of the 19th century when spending several weeks abroad became more common for the wealthy. 

By the 1970s tourists and executives needed to cart the wherewithal for a few nights away through vast airports. 

And so the wheelie-bag came to symbolise the era of mass travel.

The rise of the wheelie-bag reflects the falling cost and increasing speed of long-distance travel. 

Cheaper air fares, rising incomes and more leisure time have made foreign trips routine and a holiday abroad accessible to many in the rich world wishing to escape their daily stress. 

Travel brings new experiences and memories (or moments to capture on Instagram). 

And if not every mind is broadened, surely few suffer the opposite effect. 

As Mark Twain put it, “Travel is fatal to prejudice, bigotry and narrow-mindedness.”

The ease of travel has not just expanded tourism. 

As companies have spread across the world so have their workers. 

Business travel keeps multinational companies and supply chains connected. 

And the ability to get away has let people spread around the world to work, learn or just have a change of scene. 

As families have dispersed so has the need to keep in touch or attend weddings and birthday parties in foreign parts. 

It has brought the world together by allowing family and friends to live farther apart.

Yet until recently few people went far. 

Travel was slow, difficult and expensive when it relied on wind or horsepower. 

Steam and railways opened the gates a little wider. 

But getting far afield even 100 years ago took an ocean liner or airship, a pricey way to go. 

A first-class cabin on the Titanic in 1912 started at £30 ($3,500 today); a transatlantic ticket on the Hindenburg cost $400 in 1936 (both one-way, as it later turned out). 

The big surge in international travel came with flying. 

A train on the trans-Siberian route from Beijing to Moscow takes over five days; a flight around seven hours. 

Yet the real game-changer was cheaper fares. 

In 1950 only 25m people took a trip abroad, says the United Nations World Tourism Organisation (unwto). 

By 2019 the number of trips had grown to 1.5bn (and that excludes migrants, refugees and visits of over a year).

Nearly three-fifths of international travellers arrived and departed by plane in 2019, compared with only 5% by sea and 1% by train, according to unwto. 

The 35% of travellers crossing borders in a car were mostly Europeans, inhabitants of the world’s largest travel market, taking advantage of their continent’s small size and good roads. 

Going on holiday is the main motive for travel abroad, accounting for 55% of trips. 

Business travel made up 11% of the total. 

Most of the rest was to visit families and friends abroad. 

Some travel for religious reasons (2m Muslims visit Mecca every year); and around 15m sought medical treatment in 2017.

International travellers have filled tills for hotels, restaurants, car-hire firms and tour operators. 

Their spending hit $1.5trn in 2019. 

Before covid-19, travel contributed 4.4% of GDP and 6.9% of employment in the OECD rich-country club. 

International travel made up 6.5% of global exports in 2019, according to the World Trade Organisation. 

In all, travel and tourism accounts for over 330m jobs, one in ten of the world’s total, claims the World Travel and Tourism Council (WTTC).

Covid-19 has devastated an industry that relies on the freedom of people to move. International travel stopped almost completely between March and May 2020, as four-fifths of countries closed their borders. 

Forbidden or unable to get around, travellers have stayed put. 

International arrivals fell by 70-75% in 2020, estimates the UNWTO, with 1bn fewer travellers and $1.1bn less spending (see chart). 

That is ten times the shortfall in travel spending in 2009 after the financial crisis. 

And recovery looks far off, even with effective vaccines. 

The OECD predicts that tourism will be among the “last sectors of the economy to…recover lost demand”.

It is not all dark clouds, however. 

Greenhouse-gas emissions by commercial jets plunged in 2020, intensifying debate about how to curtail this pollution permanently. 

Destinations blighted by overtourism have had a break. 

And optimists reckon that in the long run the link between growing wealth and the urge to travel will remain unbroken. 

This report will argue that, for all its high short-term costs, the pandemic may accelerate trends that will eventually make travel both easier and less damaging. 

Today’s travel industry may have taken a battering—but the new one that emerges could be better than ever. 

Winter of Discontent

Merkel Loses Her Way, and Her Temper, in the Corona Crisis

One might think that Chancellor Angela Merkel, with her background in science, would be a perfect fit in the coronavirus pandemic. But lately, she has been losing her patience with state governors and having trouble connecting with the German populace.

By Melanie Amann und Martin Knobbe

      German Chancellor Angela Merkel Foto: Xander Heinl / photothek / Imago Images

Prior to every meeting of the German cabinet on Wednesday mornings, conservative ministers – politicians from Chancellor Merkel's Christian Democrats (CDU) and their Bavarian sister party Christian Social Union (CSU) – used to meet up for breakfast. 

But since the beginning of the coronavirus pandemic, they have been coming together for a video conference instead. For months, Merkel, her team and leading conservative parliamentarians have only been meeting virtually.

Very little from these breakfast meetings makes its way into the public spotlight. There is no agenda, no issues predetermined for discussion. 

Frequently, one of the participants makes an observation and they all then talk about it. And that is what happened on a Wednesday in early February, when Michael Grosse-Brömer, chief whip for conservatives in parliament, took the floor.

According to meeting participants, Grosse-Brömer noted that farmers were once again driving their tractors through Berlin's government quarter in protest against the completely excessive insect-protection regulations issued by the Environment Ministry, which is under the control of the center-left Social Democratic Party (SPD), Merkel's junior coalition partner. 

"We urgently need to rework them," Grosse-Brömer said. Agriculture Minister Julia Klöckner apparently spoke up immediately. Yes, she said, she agrees. 

It is imperative that something be done about the insect-protection measures.

Klöckner was immediately interrupted by the chancellor. "Yes, then go ahead Julia"! 

Merkel said, according to participant accounts. 

Why, she asked, hasn't the agriculture minister been able to clear up the insect issue? 

Why is it that she, Merkel, is forced to read everywhere that she needs to take control of protecting insects, the chancellor demanded to know?

"Julia, I don't think it’s the Environment Ministry spreading such demands," the chancellor reportedly said. 

And anyone who thinks that conservatives can ignore the need to protect the bees, she said, "I wish them lots of fun in the campaign." 

A sheepish silence ensued.

Impatience, petulance, opprobrium extending to accusations of disloyalty: It's not the kind of behavior that is normal for Merkel. 

Especially not when the discussion is about bees. 

Usually, the chancellor simply ends such debates with an ironic observation.

Losing Her Stoicism

These days, though, Merkel is struggling to find the energy and patience to consider the fates of Germany's insect population. 

She is devoting the majority of her waking hours to the fight against the virus, which has cost the lives of more than 60,000 people in Germany. 

"And still, every single bee ends up on her desk," says a confidant.

The battle against the pandemic is wearing down even the stoic temper of the chancellor. 

Added to that are the political errors that have been made. 

To be sure, many of the defeats suffered in this fight are not her responsibility. 

Sometimes it’s the state governors, sometimes the European health commissioner and sometimes its Germany's own health minister.

Ultimately, though, all eyes turn to the chancellor, whose failures over the course of 15 years in office are being brutally laid bare. 

Despite the fact that half a dozen members of her government bear responsibility for digitalization, Germany is still way behind on the issue. 

Despite a German agency recommending in 2012 that the country prepare for a global pandemic, almost nobody in Germany was really ready for it.

Despite myriad warnings in summer 2020, including from Merkel herself, of the dangers of a second pandemic wave, it was allowed to crash over the country at year's end, almost completely unhindered. 

And despite Germany being the economically strongest country in the European Union, and despite holding the rotating presidency of the Council of the EU until the end of December, Merkel was unable to leverage that power when it came to buying sufficient quantities of vaccine.

Indeed, ever since the failed vaccine rollout, approval for the job Merkel is doing has been sliding. 

The chancellor's personal approval ratings are still high, but she has lost her shine.

One reason is that the sophisticated negotiating style she has developed over the course of many years has not always proven effective in the pandemic. 

The state governors – who hold significant power in Germany's federal system – consistently demand compromises, but the virus doesn't care a bit about such political niceties.

By the time elections roll around at the end of September, it is looking as though it won't be the virus that is defeated, but Merkel herself.

More Fearful and Apprehensive

The chancellor's public appearances during the pandemic have frequently sounded something like this: "We know that our R-value is not below 0.7, but hovers around 0.8 to 0.85." 

If the viral mutations "are more aggressive by a factor of 0.3, then our reproduction value would again be above one, which means we would quickly see exponential growth."

R-values, exponential growth, incidence: One might think that a physicist like Merkel is perfect for this crisis. 

She has faced a number of crises during her tenure at the top, but with her background in science, the current one seems right up her alley.

In 2008, when the German banking system was facing ruin, she was forced to enter the, for her, unfamiliar world of subprime lending, ratings agencies and bad banks.

When Greece was facing collapse in 2009, almost bringing the rest of the European currency along with it in 2012, the situation was a bit more compatible with Merkel's skill set. 

While the crisis remained primarily economic in nature, it posed a fundamentally political question: Can a German chancellor allow the eurozone to drop one of its members?

When the Ukraine crisis erupted in 2014 and the chancellor found herself in Minsk negotiating a peace deal with Russian President Vladimir Putin, she was able to lean on her personal experience of growing up in East Germany and her understanding of the Russian mentality.

Then, in the 2015 refugee crisis, the primary issue for Merkel, the daughter of a Protestant pastor, was a moral one. 

Was the German chancellor prepared to close down internal European borders and repel refugees with violence if necessary? 

She wasn't.

The pandemic, likely Merkel's final crisis, leads her back to a time before she entered politics – to her scientific education, which continues to guide the way she thinks and acts today. 

But it is precisely this expertise – so suitable for this crisis – which is paralyzing Merkel, making her more fearful and apprehensive than others.

Confidants report that the chancellor also spends her weekends reading studies and statistics, speaking on the phone with virologists and even starts performing calculations herself, with the support of her chief of staff, Helge Braun, a doctor who shares Merkel's inclination to design Germany's pandemic response entirely according to scientific tables and graphs.

She has essentially put a stop to all private meetups with artists, actors or old friends over a glass of wine. 

"She has very little diversion in her life at the moment," reports one person in her orbit.

The result is someone who thinks and talks like a virologist, a chancellor who can tell you from memory the number of intensive care beds Germany currently has available or the number of districts with an incidence rate over 50. 

A chancellor who doesn't understand why people, given the dangers, can't just manage to remain in lockdown for another two weeks. 

A chancellor who can't comprehensibly explain why our lives should continue to remain in limbo and the stores remain closed even though infection numbers are plummeting.

"More Empathetic Moments"

"We have decided that hair salons can reopen on March 1," she said during her most recent press conference. 

"Because by that day, it is extremely likely that Germany's nationwide incidence rate will have dropped to 50." 

It's maybe not the best way to connect with the electorate.

The fact that the Chancellery recommended in the fall that every child should only meet up with "a single friend" underlines the degree to which the chancellor's focus on statistics has blinded her to the human side of the pandemic equation. 

"Sometimes," says a confidant, "I have missed more empathetic moments from her, more words of confidence and hope."

Merkel tried recently to once again speak with completely normal people. 

Her series "Talking with the Chancellor" focused on families in the pandemic. 

Fourteen mothers and fathers were invited to join her for a video conference, a carefully chosen cast of characters including single parents, those with many children and people who had immigrated to Germany – all friendly and eloquent.

It was an attempt to shed the image of a heartless pandemic hardliner that some have fashioned for Merkel – and one that bothers her. 

"I will not accept accusations that I torment children," she retorted harshly to Mecklenburg-Western Pomerania Governor Manuela Schwesig during one round of negotiations.

But the online town meeting served to once again show that Merkel's strengths do not lie in offering comfort and solace. 

For one-and-a-half hours, she listened to the problems the parents were facing, to the financial tribulations of single parents and to the feeling shared by parents everywhere of having to choose between spending their time with their children or with their jobs. 

Then she said things like:

"I can't really give you a good answer."

"It of course pains me when I see your unhappiness."

"I really did want something different for Germany."

"I can only repeat what we have said: The first step should be reopening the schools."

The most powerful woman in Germany looked extremely powerless.

When and how the schools in Germany will reopen was also a focus of the meeting of state governors with the chancellor on Wednesday. 

And Merkel didn't even try to negotiate. 

Participants quote her as saying she had been hoping for a consensual agreement on waiting a while before reopening. 

But unfortunately, she continued, some states had reached "different conclusions." 

The chancellor said she would not question the decisions of the states in public. 

But in the video conference on Wednesday, she made clear: "This is not my preferred course of action."

"Not Happy"

More cautious governors, such as Winfried Kretschmann from Baden-Württemberg, who had been hoping for support from the chancellor, reacted with pique: "Angela, I am not happy about your change of course."

Leaving decisions of nationwide importance to others is also not something Merkel is used to. 

The national government was able to address previous crises on its own. 

How to address the Ukraine conflict or what measures should be relied on to save the euro are not issues in which state governments have a say. 

Governors were, of course, heavily involved in the refugee crisis, but the primary focus was on money, and Berlin holds the biggest purse strings. 

The political course was charted in the Chancellery, in federal parliament and in the Federal Office for Migration and Refugees.

Merkel was the focus of a lot of anger at the time, but at least that anger was triggered by her own policies, her own approach and her own mistakes. 

Now, she just says that she has no choice but to accept the authority of the German states. 

The fact that infection numbers exploded in the winter, she says, was a consequence of "our indecisive approach in late summer and fall." 

It can be assumed that the chancellor does not believe that her own approach was indecisive.

"We lost control of it in October," she recently complained in a meeting with leading parliamentary conservatives. 

Back then, when the state governors were unwilling to accept a hard lockdown, Merkel had Chief of Staff Helge Braun complain openly that the measures agreed to unanimously by the states were insufficient.

Now, she has begun talking about her own impotence. 

In Germany's federalist system, she says, the chancellor doesn't have a veto like in the EU. 

Legally, though, she could push through a national law to impose a lockdown, and even to close the schools. 

But such a forceful approach is not Merkel's style. 

She would rather run the risk of the states making what she believes to be erroneous decisions, before then demonstratively rejecting responsibility for those decisions.

"I need a break, I need some fresh air," Merkel allegedly said abruptly during one of the meetings with state governors, according to a meeting participant, who added that the chancellor has sometimes become so agitated with discussions that she'll suddenly bow out.

But did Merkel really say such a thing? 

"Nonsense," says another participant in the meeting. 

Yes, the chancellor needs a break every now and then. 

But it's not like she stares at the wall or goes out to the balcony for a cigarette. 

Instead, she continues negotiating with a smaller group.

Since video conferencing has taken over the political world, a lot of quotes, half-sentences and outbursts find their way into the public eye on Twitter and on news websites, including Spiegel.de. 

Supporters of Merkel complain that they aren't always real, or are incomplete, free of context and inaccurate. 

Confidants of the chancellor say that the constant leaks and misunderstandings annoy her greatly.

Still an Opportunity

She doesn't often complain vocally, as she did during a meeting with conservative domestic policymakers – at a time when news was making the rounds that she had allegedly demanded the lockdown be continued until Easter. 

Instead, she prefers to rely on sarcasm, say those close to her, starting meetings with bon mots such as: We don't really need to meet. 

"Everything is in Bild anyway" – a reference to Germany's largest tabloid newspaper. 

This quote, too, of course, is the result of a leak.

Since the beginning of the pandemic, there are no safe rooms any longer for confidential political discussions. 

It makes life easier for journalists, but for politicians, it means they have to weigh each word with extreme care, as if they were speaking on camera. 

And for a chancellor who has been in office for 15 years and hasn't always demonstrated expert communications skills, it must be unbearable.

Merkel has a bit more than seven months until the fall general election, time that will be almost entirely focused on the battle against the coronavirus. 

Despite the numerous other issues on which she has not managed to find closure. 

There is still no high-speed internet in rural areas, no real answer to the climate disaster, and no strategy for integrating refugees into German society. 

There is no answer to prevent Germany's economy from being swallowed up by China. 

But none of those issues are about life and death.

"Merkel knows that the history books are currently being rewritten," says one state governor. 

And her legacy will depend a great deal on whether she will be successful in warding off the virus to the degree possible, vaccinating the population, protecting the elderly and supporting the economy. 

Merkel herself, say confidants, believes that there is still an opportunity to do all of that. 

But it's not a slam dunk.

"Sometimes, Merkel sounds really dark," says the governor. 

"She'll tell us: Soon, I won't be responsible anymore. 

Then it will be up to you to protect our prosperity."

In her most recent speech in parliament, Merkel promised to fulfill her mandate "until the very last day of my tenure to defeat this pandemic." 

And: "Ultimately, we could succeed in leading our country into better times."

We could succeed.

She used to be known for a more confident pronouncement: We can do this. 

Fed to test banks’ ability to withstand 55% fall in equity prices

Regulators lay out criteria for annual stress exercise with stocks at record highs

Laura Noonan in New York and James Politi in Washington

The Federal Reserve undertook an additional stress test last year to test banks’ resilience through the pandemic © REUTERS

The largest US banks will have to prove they can withstand the US stock market crashing by 55 per cent, regulators said on Friday, outlining the parameters for annual stress tests that decide how much banks can pay out to their shareholders. 

The striking scenario for a huge decline in equity prices comes as US and global stocks touched record highs earlier this week, fuelling fears of a bubble. 

The Federal Reserve laid out the terms of its annual exercise on Friday, which apply to the largest 19 banks led by JPMorgan Chase. 

It includes a sharper fall in economic output than the last scenario, which was used in a special test in September to assess banks’ resilience through the Covid-19 pandemic, but a lower peak in unemployment. 

The most adverse scenario — which simulates a 55 per cent shock to the Dow Jones Total Stock Market index by the third quarter of 2022 — is worse even than the “almost 50 per cent” decline tested in September.

A sharp fall in equity prices would reduce the value of the trading assets banks hold. It would also have a knock-on effect as big swings in prices lead to higher capital requirements.

The new stress test criteria include a 10.75 per cent peak in the US unemployment rate by the third quarter of 2022, compared with the 12.5 per cent jobless rate that was modelled in last year’s exercise. The US unemployment rate is at present 6.3 per cent.

Economic output — as measured by gross domestic product — falls 4 per cent in the updated scenario, versus 3 per cent in September’s.

“The scenarios are not forecasts and the severely adverse scenario is significantly more severe than most current baseline projections for the path of the US economy under the stress,” the Fed said. 

After the last stress tests, the Fed said banks could resume limited share buybacks in the first quarter, as long as they hit profit targets. The central bank has yet to give guidance on how much lenders can pay out in the second quarter. 

“The banking sector has provided critical support to the economic recovery over the past year. Although uncertainty remains, this stress test will give the public additional information to its resilience,” Randal Quarles, the Fed’s vice-chair for supervision, said in a statement.

Some banks, including JPMorgan Chase and Morgan Stanley, have chafed at their inability to return more cash to shareholders given they have enjoyed record profits despite the pandemic.