Update 21 July 2020
European Council agrees on MFF and Recovery Fund of €1.82 trillion
Heads of state and government of the member states agreed early Tuesday on a new multiannual financial framework (MFF) 2021-2027 and an EU recovery fund after the EU summit went into the fifth day of negotiations. The EU’s recovery fund, to be composed of €390 billion in grants and €360 billion in loans, will be attached to the €1.074 trillion seven-year budget, bringing the total financial package to €1.82 trillion. While the size of the overall recovery fund was preserved at €750 billion, the ratio between grand and loans was rebalanced due to opposition of some countries, especially the so-called Frugal Four – Austria, Denmark, the Netherlands and Sweden.
The Commission will be authorised to borrow funds on behalf of the EU on the capital markets to finance the EU recovery fund. In order to repay the borrowing until 2058, new own resources will be introduced – a plastic-based contribution, a carbon border adjustment mechanism, and possibly a financial transaction tax.
In order to reach their agreement, heads of state and government agreed on cuts to funding for some proposed EU programs and initiatives, such as new health initiative proposed by the European Commission as well as research programs. Furthermore, the EU leaders discarded the proposed €26 billion “solvency instrument”.
EIB approves €16.6 billion for economic and health response to COVID-19 outbreak
The European Investment Bank (EIB) approved during its Board meeting new financing in the amount of €16.6 billon for different European and global projects. A large part of funding (€10.2 billion) will be used for investments in public health, public services and for support of companies in sectors impacted the most by the COVID-19 outbreak. Furthermore, the EIB also approved €5.2 billion for new private sector financing schemes and €2 billion for investments in energy and energy efficiency around the world. Lastly, the EIB also allocated €1.9 billion for the modernization of public transport.
Update 13 July 2020
European Council President presented his proposal for MFF and Recovery Package
After conducting bilateral talks with 27 EU leaders, the President of the European Council, Charles Michel presented on 10 July 2020 the negotiating box, i.e. his proposal for the new Multiannual Financial Framework (MFF) and the respective Recovery Package. The core elements of the proposal include:
- Adjustment of the MFF’s size to €1,074 billion;
- Preservation of budget rebates for Denmark, Germany, the Netherlands, Austria and Sweden;
- Preservation of the Recovery Fund of €750 billion as one-off tool for an exceptional situation, keeping the balance between loans and grants;
- Commitment of 70% of funds from the Recovery and Resilience Facility (RRF) in 2021 and 2022, and 30% in 2023;
- Reform and Resilience National Plans in line with the European Semester as the basis for receiving support.
Furthermore, Michel proposed to support rule of law more strongly through the MFF and to allocate 30% of funding to climate-related projects. In addition, he proposed three focus areas for EU own resources – plastic waste, carbon adjustment mechanism and the digital levy. The European leaders will use this proposal as the basis for negotiations during the European Council Meeting on 18-19 July 2020.
Commission and EIB provided CureVac with €75 million financing for vaccines development
The European Investment Bank (EIB) and CureVac signed a €75 million loan agreement for the development and expansion of manufacturing of vaccines, including CureVac’s vaccine candidate against COVID-19. The transaction is financed under the Infectious Diseases Finance Facility of Horizon 2020, the EU research and innovation programme.
The loan will support CureVac’s activities to complete its new messenger ribonucleic acid (mRNA) production facility in Tübingen, Germany. The financing will be provided in three €25 million tranches upon completion of pre-defined milestones.
Update 02 July 2020
Germany takes over EU Council Presidency and presents key priorities for action
Germany took over the EU Council Presidency on 1 July 2020 for the following six months from Croatia. Due to the COVID-19 crisis, the German Government has revised its programme and rebalanced the priority topics of its presidency.
As expected, the Germany Presidency will above all focus on dealing with the COVID-19 pandemic and the reconstruction of the European economy. Other priority topics will include:
- Rapid adoption of the EU Multiannual Financial Framework (MFF) for 2021-2027 and swift establishment of the European Recovery Fund;
- Negotiations on future relations with Great Britain;
- Promotion of climate protection and digitisation in the context of the economic recovery;
- Increasing Europe’s global power, with a focus on the medium-term integration of the Western Balkans and future relations with the People’s Republic of China.
Charles Michel will present negotiating box on new MFF next week
The President of the European Council, Charles Michel is expected to present a negotiating box on the amended Multiannual Financial Framework (MFF) and the respective Recovery Plan, on the basis of which the member states will discuss a potential future compromise. After Michel concludes talks with all leaders of the EU member state in the following days, the negotiating box will be officially announced in the second half of next week.
According to media, it is expected that Michel’s proposal will preserve the size of the 750€ billion Recovery Plan, whereas the MFF might be slightly reduced. As the European leaders largely expressed their support for agreeing on the final version before summer break, it is expected that the European Council aims to conclude a deal until end of July.
Commission expands Temporary Framework for State aid
The European Commission has further extended the scope of the State aid Temporary Framework adopted on 19 March 2020 to support the economy after the outbreak of COVID-19. The extended framework will enable member states to provide public support to all micro and small companies, even if they were already in financial difficulty on 31 December 2019. Before the latter measure, these companies were not eligible for aid. Moreover, the amendment effectively increases the possibilities to support innovative start-up companies, which may be loss-making in their high-growth phase, but which are crucial for Europe’s economic recovery.
Furthermore, the Commission has prolonged the validity of certain EU State aid rules which would otherwise expire at the end of 2020 by one year to mitigate the economic and financial impact of the coronavirus outbreak on companies.
Update 22 Juni 2020
European Council might reach an agreement on Recovery Plan in mid-July
The European Council held its latest digital summit on 18-19 June 2020 to discuss the Commission’s Recovery Plan. As expected, the European leaders did not reach a final agreement on the proposal and decided to discuss the recovery package further during the next in-person meeting scheduled for mid-July. The President of the European Council, Charles Michel highlighted that while no consensus for the whole package could be reached, an agreement was found on several other points. It is now expected that Michel will start informal negotiations with heads of state and governments to create a foundation for a compromise agreement in mid-July. The Commission President, Ursula von der Leyen perceives the initial discussions as positive and hopes that an agreement can be reached before the summer break.
European Parliament approves easing rules for banks
The European Parliament approved on 18 June 2020 the “quick fix” to the Capital Requirement Regulation (CRR) to temporarily ensure favourable conditions for banks, providing more flexibility in EU banks’ prudential rulebook to focus on lending to the European economy. The new easing rules will support credit flows to companies and households and absorb losses, mitigating the economic consequences of the COVID-19 crisis. Adopted changes include:
- Deferred application of the leverage ratio buffer by one year to January 2023 to allow banks to increase their loan amount;
- Advanced application of both the SME and infrastructure supporting factor, ensuring credit flows to SMEs and supporting investments in infrastructure;
- Liquidity measures provided by central banks in a crisis context will be effectively channeled by banks to the economy.
MEPs call for the re-establishment of the free movement across the EU
In the framework of a resolution adopted on 19 June 2020, the Members of the European Parliament (MEPs) expressed their concern regarding the impact of the internal border controls in the Schengen area on European economy. The MEPs call for a swift return to a fully functional Schengen area in order to ensure a quick economic recovery after the COVID-19 pandemic. Furthermore, they highlighted that any uncoordinated action from the EU member states is counter-productive and that the principle of non-discrimination in the reopening of the borders must be respected.
Commission’s global campaign on COVID-19 to culminate in global pledging summit
The global campaign on “Global Goal: Unite for our future” launched by the European Commission in the context of the COVID-19 outbreak will culminate in a global pledging summit and a concert on 27 June 2020. The campaign was launched on 28 May under the patronage of Commission President Ursula von der Leyen to address the pandemic’s impact on the most vulnerable communities, ensuring equitable access to affordable coronavirus technologies and strengthening national health systems.
The aim of the summit is to mobilise additional funding to develop COVID-19 vaccines, tests and treatments.
Update 4 June 2020
ECB increases Pandemic Emergency Purchase Programme to €1.35 trillion
The Governing Council of the European Central Bank (ECB) has adopted measures on 4 June 2020 to increase its Pandemic Emergency Purchase Programme (PEPP) by €600 billion in addition to the already agreed 750€ billion, bringing the amount of the programme to €1.35 trillion. This decision aims at further easing the general monetary policy stance and supporting funding conditions in economy. As it was the case until now, the purchases will continue in a flexible manner across asset classes and it will run until at least end of June 2021.
European Commission presents amended proposal for Horizon Europe
Following the presentation of the amended multiannual financial framework of the EU (MFF), the European Commission published an amended proposal for Horizon Europe – the EU’s framework program for research and innovation. The proposal intends to include €433.2 billion of resources from the EU Recovery Instrument, which would be directed, inter alia, towards the following measures:
- measures to restore employment, job creation and health care systems;
- support measures for businesses affected by the pandemic, especially SMEs;
- measures to strengthen the strategic autonomy of the Union in vital supply chains;
- support measures for a just transition to a climate-neutral economy.
Commission proposed modifications for 2020 budget
The European Commission proposed modifications to its budget for 2020 to make €11.5 billion for crisis repair and recovery available already in 2020. Once available, the funds will be directed towards the regions and businesses most affected by the crisis and those in need outside EU borders. The proposal is a technical follow-up of the major recovery plan which the Commission presented last week.
Update 29 May 2020
Commission proposal for the allocation of funds within Just Transition Fund
As part of the European Commission’s proposal for the amended EU-budget and the €750 EU recovery instrument, the Just Transition Fund increased from €7.5 billion to €40 billion. On Thursday (28 May), the Commission revealed figures showing how the individual EU member states will be affected by the increase of the fund. Poland is the biggest winner from the amended proposal with €8 billion, while Germany will be eligible for €5 billion, instead of €877 million before the fund’s increase. Austria will be eligible for €280 million.
EU Recovery Plan underlines the relevance of cohesion for the recovery
The Commissioner for Cohesion and Reform, Elisa Fereira emphasized that the cohesion policy within the EU Recovery Plan will be one of the key areas for the European recovery that will consider the different impact of the COVID-19 outbreak across the EU member state. To that end, the proposed emergency instrument REACT-EU – Recovery Assistance for Cohesion and the Territories of Europe – will be implemented to confront the raising inequalities in various EU regions. The latter will top the regular structural fund in the area of cohesion policy with €55 billion and will stay in force until 2022.
Update 28 May 2020
EU Recovery Instrument will be linked to green conditions
The €750 billion EU recovery instrument proposed by the European Commission and aimed at reviving the European economy after the COVID-19 crisis, will be subject to green conditions, according to the Commission. Moreover, 25% of the funds in the EU’s amended budget proposal and the recovery fund will be allocated to climate-friendly and sustainable spending. Furthermore, some Commission’s sources underlined that spending will be guided by a sustainable financial taxonomy to channel private investment in technologies contributing to at least one of six predefined environmental goals.
Strict control and monitoring by both the Commission and the Council over the resources allocated under the recovery fund will aim to ensure that money is spent on investment and reforms in the regions and sectors most affected by the crisis.
Commission presents its adjusted work programme for 2020
Together with the proposal for the EU recovery plan, including the revised long-term EU budget 2021-2027, the European Commission presented its adjusted work programme for 2020 on 27 May 2020. The adjusted programme, which was adapted as response to the COVID-19 crisis, underlines that the Commission remains fully determined to deliver on its flagship initiatives, the European Green Deal and the Digital Strategy, to revive the European economy.
However, the adjusted work programme also indicates that the adoption of the renewed Sustainable Finance Strategy will be postponed until the fourth quarter of 2020.
Parliament welcomes the Commission’s proposal for EU recovery
After the European Commission presented yesterday a new recovery instrument of €750 billion as a part of the larger €1.85 trillion Multiannual Financial Framework (MFF), most Parliament’s party group leaders welcomed the proposal, underlining that it will contribute positively to the EU solidarity. Furthermore, they expressed the need for clear conditions how the money borrowed on the international markets will be paid back. The most critical voices came from the party group “Identity and Democracy”, which argued that the proposal lacks legal basis and that its implementation will strongly impact the taxpayers.
For the Commission’s proposal for EU recovery and the overall EU budget for 2021-2027 to enter into force, the Council has to adopt it in a unanimous vote after having received Parliament’s consent. The Commission urges the European Council and the co-legislators to examine the proposal rapidly, with a view to reaching a political agreement at the European Council level by July. The next Council meeting is on 19 June 2020.
Update 27 May 2020
Commission puts forward its proposal for the EU Recovery Plan in the framework of the MFF
The European Commission has adopted today its proposal for the next Multiannual Financial Framework (MFF) 2021-2027 with an amount of €1.85 trillion. The new proposal includes an extensive new recovery instrument called “Next Generation EU” of €750 billion.
The instrument is aimed at boosting the recovery of the EU economy in the following years and is structured along three pillars: support to member states with investments and reforms, kick-starting the EU economy by incentivising private investments and addressing the lessons of the crisis (healthcare security and preparedness, civil protection).
The additional €750 billion are included in the regular seven categories of the MFF as listed below.
1. Single Market, Innovation and Digital (€210.5 billion)
- Support to Horizon Europe with an additional amount of €13.5 billion to reinforce vital research in health, resilience and the green and digital transitions;
- New Solvency Support Instrument with a budget of €31 billion to unlock 300€ billion in solvency support for European companies;
- Support to InvestEU with €30 billion to boost investing and support the Strategic Investment Facility.
2. Cohesion and Values (€984.5 billion)
- Recovery and Resilience Facility of €560 billion for investments to the most affected regions embedded in the European Semester (€310 billion of grants, €250 billion available in loans);
- Support to Cohesion Policy of additional €55 billion under the new Initiative REACT-EU.
3. Natural Resources and Environment (€402 billion)
- Strengthen InvestEU with additional funds of €40 billion to accelerate climate neutrality transition;
- Reinforce the European Agricultural Fund for Rural Development with additional €15 billion to support structural changes in line with the Green Deal.
4. Resilience, Security and Defence (€29.1 billion)
- Reinforce the rescEU with additional €2 billion to equip the Union to prepare for and respond to future crises;
- Health Programme “EU4Health” of €9.4 billion to strengthen health security and prepare for future health crises.
5. Neighborhood and the World (€118.2 billion)
- Supporting the Neighborhood, Development and International Cooperation Instrument with additional €10.5 billion;
- Reinforce Humanitarian Aid with additional funds of €5 billion.
6. Migration and Border Management (€31.1 billion)
7. European Public Administration (€74.6 billion)
The Next Generation EU Instrument would be financed through borrowings on financial markets carried out by the Commission that would be repaid over a long period of time. In order to repay these, the Commission proposes new EU own resources, including possibly an own resource based on the Emissions Trading Scheme and a Carbon Border Adjustment Mechanism. This would complement the already proposed own resources based on Value Added Tax and non-recycled plastics. Out of the 750€ billion raised, €500 billion will be offered as grants and €250 billion as loans.
The Commission emphasized that the EU Recovery should happen based on the following principles:
- European Green Deal as the Recovery’s Strategy;
- Strong Single Market and a rapid adaptation to the Digital Age;
- Fair and Inclusive Recovery;
- Strategic autonomy of the EU.
The Commissions underlines the need to reach a rapid political agreement on the proposed Next Generation EU and the overall EU budget at the level of European Council already by July in order to equip the EU with an instrument to revive the economy and strengthen the recovery.
Update 25 May 2020
“Frugal Four” presented counter-proposal to French and German EU recovery plan
Austria, Denmark, the Netherlands and Sweden – the “Frugal Four” – presented their own draft for an EU recovery fund as a response to the recovery program presented by France and Germany on 18 May 2020. The basic aspects of the counter-proposal are similar to the Franco-German plan: the establishment of a common fund directed towards the economic segments which are particularly affected by the COVID-19 crisis, with investments targeted at research, innovation, health and the green and digital transformation. However, the new initiative differs in two points:
- “Loans for Loans”: funds from the capital markets are to be redistributed as loans instead of grants;
- The fund should operate for a timeframe of two instead of three years.
The Commission will present its recovery fund concept on Wednesday (27 May), together with an amended proposal for the EU budget.
Commission approves €8 billion Austrian aid scheme for compensation of damages
The European Commission approved an Austrian aid scheme worth €8 billion aiming to compensate companies for certain damages suffered as a result of the COVID-19 outbreak. Under the scheme, the compensation will be paid in the form of direct grants and can cover a maximum of 75% of fixed costs incurred during a limited period of three months, with a maximum amount of €90 million per group. Business of all sectors are entitled to compensation.
Commission to present a White Paper on an Instrument on Foreign Subsidies
As the COVID-19 outbreak has weakened EU companies and made them vulnerable for hostile foreign takeover, the European Commission is intending to present a White Paper on an Instrument on Foreign Subsidies. The paper might suggest giving EU’s competition watchdog the competence to react and intervene in foreign takeovers of European companies in case they are subsidized by another state. In addition, Commission’s Directorate General Trade should also receive an important role concerning this issue.
In a similar vein, the EU Trade Commissioner Phil Hogan announces that the EU will pursue an “open strategic autonomy” in the area of trade, in which a right balance should be found between a Europe “open for business” and a Europe that protects its companies based on trade defence mechanisms.
French MEP Pierre Larrouturou calls for financial transaction and profit tax to finance EU recovery
A Socialist French MEP Pierre Larrouturou proposed in a letter sent to the European Commission and the EU Member States a new scheme for financing the EU recovery that would meet the demands of both southern and eastern EU countries as well as the demands of the so-called “frugal four”. Larrouturou proposed to introduce two new resources of the EU, including a European tax of 0.1% on financial transactions with a potential to yield up to €57 billion per year and a profit tax of 5% which could raise up to €75 billion per year. Both proposals have been in the legislative pipeline for several years but were blocked in the European Council due to unwillingness of some member states to raise additional taxes.
Update 22 May 2020
European Commission might again impose EU budgetary rules from 2021
After the European Commission presented on Wednesday (20 May) its country specific recommendations for member states as part of the European Semester mechanism to coordinate their economies and monitor their public finances, Commission Vice-President, Valdis Dombrovskis, underlined that the Commission aims to assess the fiscal situation again in autumn 2020. He added that once the EU fiscal rules are reinstated again after being suspended for 2020, the Commission will take into account that the starting position of deficit and debt levels will have increased when deciding on the fiscal recommendations to return to deficits below 3% of GDP and debt levels under the 60% of GDP threshold.
In reaction to this, French Finance Minister Bruno le Maire underlined that the EU budgetary rule would be counterproductive in the times of EU recovery as they would put limitations on public spending. In that regard, he calls for suspension of the rules until after 2021 in order to boost the EU economy in the upcoming period.
“Frugal Four” to present counter-proposal to Franco-German recovery fund proposal
Austria, Denmark, the Netherlands and Sweden – the so-called “frugal four” – work on a counter-proposal to the €500 billion joint EU recovery plan proposed by France and Germany on Monday (18 May). The Franco-German recovery plan contained a financial package, which will be made available in the form of grants instead of loans. The four member states, however, reject the financing of non-repayable subsidies and awarding grants. Therefore, it is expected that the counter-proposal, which will be made available in the coming days, will focus on loans instead of grants and subsidies.
Update 20 May 2020
Commission’s draft of the “Green Recovery” was leaked
As the European Commission is working on the EU Recovery plan to be presented on 27 May 2020, a document was leaked today depicting the expected Recovery Plan as a “Green Recovery Plan” and presenting several supportive measures in a number of areas. The plan would entail following actions:
- Renewables and hydrogen: several funding schemes to financially support the parallel development of renewable energy and hydrogen to achieve deep decarbonization of the economy.
- Clean mobility: increased EU funding for zero-emission drive train, electric car infrastructure, changeover of the rolling stock, night-train services as well as purchasing of clean vehicles.
- Circular Economy: investments into the waste management sector, including sorting and recycling infrastructure and technology to ensure the supply of secondary raw materials.
- Building renovation: a European Renovation Financing Facility to support investments in renovation of buildings to increase their energy efficiency.
Commission adopts the European Semester Spring Package
The European Commission has today published the European Semester Spring Package, including a communication on the country-specific recommendations (CSR) that provide economic policy guidelines to the EU member states. Due to the COVID-19 outbreak, the focus of the Package was reassessed, now referring to confronting urgent challenges of the pandemic in the short-term and on relaunching sustainable growth in the short to medium-term. The former will include social, economic, employment and above all health sector responses, whereas the latter will prioritize investment and reform measures.
Council Regulation on EU unemployment scheme SURE enters into force
The Regulation on the establishment of the European instrument for a temporary support to mitigate unemployment risks in an emergency (SURE) entered into force on 20 May 2020 following its formal adoption by the Council on 19 May. The instrument, which is complementary to short-time work schemes or similar measures, aims to assist member states with the increase in unemployment numbers as a result of the COVID-19 crisis. The financial assistance provided under SURE takes the form of a loan granted to Member States in instalments, which are financed through capital raised by the Commission on the financial markets.
The instrument will end on 31 December 2022 but may be extended for an additional 6-months period based on a proposal from the Commission.
Update 19 May 2020
Macron and Merkel announced a new proposal on EU Recovery Programme
In order to support the recovery of the European economy as well as most affected regions and sectors, French President, Emmanuel Macron and German Chancellor, Angela Merkel presented a joint proposal on the EU Recovery Programme that entails €500 billion. According to the proposal, most of the financial envelope will be made available in the form of grants, rather than loans. Besides the proposal for Recovery Programm, the two leaders proposed also to:
- Strengthen EU competences in the health sector, including coordination of procurement of vaccines and a creation of a joint stockpile of medical equipment;
- Boost modernization of European economy based on environmental and digital targets;
- Enhance EU industrial resilience and sovereignty.
During the today’s meeting of EU’s finance ministers, Austria, Denmark and the Netherlands disagreed with the proposal and voiced concern regarding grants offering.
Capital Market Union Strategy might represent a key tool for EU’s post-crisis economy recovery
After EU member states implemented various fiscal measures to support the economy after the COVID-19 outbreak, the EU is preparing a new package of initiatives to further develop the capital markets union. The European Commission regards the package as one of the key policies for the European recovery as it will help companies receive more financing. The package aims to remove national obstacles preventing the development of EU-wide financial markets and to reduce the dependency on bank financing.
Commission mobilized €122 million for COVID-19 research
The European Commission mobilised €122 million from Horizon 2020, its research and innovation programme, for much needed research into the coronavirus. The new call for expressions of interest contributes to the Commission’s €1.4 billion pledge to the Coronavirus Global Response initiative, launched on 4 May 2020. The new Commission’s action complements earlier calls to develop diagnostics, treatments and vaccines by strengthening capacity to manufacture and deploying readily available solutions.
Businesses call for science-based green EU economic recovery
As policy-makers at national and EU level prepare to outline economic recovery package to mitigate economic damage caused by the coronavirus crisis, more than 150 major international companies – including Carlsberg, H&M, Sky and Pernod Ricard – signed a joint statement calling governments to put their focus on a green recovery. To his end, they urge governments to align national economic responses to the coronavirus crisis with the latest climate science. In particular, the companies call for policies to build resilience against future climate shocks and risks by supporting the ambitions set out in the Paris Agreement with the aim to achieve a transition to net-zero emissions by 2050.
Update 18 May 2020
Vestager expressed concern about discrepancy in emergency COVID-19 state aid
In an interview with a German newspaper, Executive Vice-President of the Commission Margrethe Vestager expressed concerns about the significant differences among member states in EU state aid approved by the European Commission in the context of the COVID-19 crisis. Vestager underlined the risk that different levels of state aid among member states may distort competition and the Single Market and hinder the economic recovery from the COVID-19 crisis. Since the Commission amended and extended its rules on State Aid following the coronavirus outbreak the first time on 19 March 2020, it approved more than €1.9 trillion worth of national aid schemes.
Weber calls for a temporary ban of Chinese takeovers of European companies
The leader of the EPP Group in the European Parliament, Manfred Weber called on the EU to restrict the Chinese takeovers of the European companies in the wake of the COVID-19 pandemic. As European companies are currently facing business and financial difficulties, Chines largely state-supported companies have an interest in acquiring those under better and cheaper conditions. Weber demands a twelve-month moratorium for Chinese investors on buying European businesses and calls the EU to protect the industry in the times of the crisis.
Eurogroup meeting reports progress on €540 billion financial package adopted last month
During a video conference held on 15 May 2020, the finance ministers of the eurozone announced that political decision to provide €540 billion for confronting the economic consequences of the COVID-19 pandemic is being translated in legal reality in a record time in the following areas:
- Pandemic Crisis Support within the European Stability Mechanism (ESM) became operational on 15 May 2020, allowing the member states to request financial means to cover exceptional costs incurred with health care, cure and prevention expenses;
- Temporary support to mitigate unemployment risks in an emergency (SURE) was agreed by the Council of the EU and it will become law in the following days.
- European Investment Bank’s Pan-European Guarantee was discussed with the EIB’s President, Werner Hoyer and the ground for an agreement by the EIB was created.
European tech start-ups call on Commission for more flexibility in EU state aid
More than a dozen tech start-ups across Europe – including industry associations in France, Germany, the UK and Ireland – underlined in a letter to Executive Vice-President of the Commission Margrethe Vestager the need for more flexibility in member states’ ability to provide state aid to innovative businesses which currently operate at a loss. Although several national governments offered aid schemes to support research and development, according to EU competition law, businesses experiencing difficulties are excluded from receiving state aid. Since several tech start-ups could not access COVID-19 support, industry groups argue that considering only current cash flow belittles the economic potential of start-ups, preventing them from receiving much-needed support.
Update 15 May 2020
Parliament calls on Commission to present a massive recovery instrument
The European Parliament voted today (15 May) on a resolution on the long-term EU multiannual financial framework (MFF) 2021-2027, EU’s own resources and the COVID-19 recovery plan. In the resolution, the Parliament calls on the European Commission to present a massive recovery fund, to be financed through the issuance of long-dated recovery bonds guaranteed by the EU long-term budget for a duration in line with the expected long-lasting impact of the crisis. Moreover, the Parliament emphasized that the fund will be part of an overall package providing an investment impulse of €2 trillion to mitigate the economic consequences of the COVID-19 crisis.
In addition, a key demand in the resolution was the proper involvement of the Parliament in the process of establishing and implementing the MFF and the EU recovery fund.
Council of the EU reached an agreement on SURE
The Council of the EU has reached an agreement on the temporary support to mitigate unemployment risks in an emergency (SURE), an instrument which was initially proposed at the beginning of April by the European Commission. The aim of the program is to support member states in financing severe increases of national public expenditure due to the COVID-19 outbreak, related to national short-time work schemes and similar measures. The scheme provides up to €100 billion of loans under favorable terms to member states.
In order to provide requesting member states with financial assistance, the Commission aims to raise funds on international capital markets on behalf of the EU. The loans will be backed by the EU budget and guarantees provided by member states. The total amount of guarantees will be €25 billion. The instrument becomes available after all member states have provided their guarantees and will be operational until 31 December 2022.
Former Commission officials call for a reform of EU trade
A group of nine former senior Commission officials urged the Commission to radically increase trade defence to avoid losing European industrial and technological assets to China and the US. More specifically, they asked to significantly shorten EU anti-dumping and anti-subsidy procedures to help levelling the playing field in international competition. Moreover, the former Commission officials call on the Commission to apply the existing instruments, including safeguard measures, to strengthen European industry.
Update 14 May 2020
Commission’s President outlined details of the new MFF proposal and EU Recovery Fund
In her speech to the European Parliament, the President of the European Commission, Ursula von der Leyen outlined different elements of the new proposal for the Multiannual Financial Framework (MFF) as well as the EU Recovery Plan. As expected, the EU Recovery Plan will be based on the MFF and it will be funded through a recovery instrument, which will be financed through borrowings of the European Commission on international markets. According to von der Leyen, the Plan will be based on three pillars:
- Recovery and Resilience Tool: to finance public investments and reforms with a focus on most affected regions in order to accelerate the EU’s transition to a climate-neutral, digitized and resilient economy. For that, the Commission will propose an increase of the funds for cohesion.
- InvestEU and Strategic Investment Facility: to mobilize private investments in strategic sectors (e.g. pharmaceuticals) for strengthening the EU’s future strategic autonomy. This would also include a Solvency Instrument, supporting strategic companies at risk as a result of the lockdown.
- RescUE and Horizon Europe: to continue supporting the work of mechanisms that have proven to be successful during the crisis with a determination of creating a new dedicated “Health Programme”.
The revised proposal for the MFF and the EU Recovery Plan will be presented until 20 May 2020.
Update 13 May 2020
Commission presented a package of measures for rebooting tourism and transport sector
The European Commission adopted a set of recommendations and guidelines in the area of tourism and transport aimed at gradually lifting travel restriction in order to reopen businesses and activities after the lockdown period. The central elements of the package are:
- An overall Strategy on Tourism and Transport in 2020 and beyond, creating a framework to enable EU to benefit from a safe tourism season;
- A common approach for the lifting of controls at EU internal borders in a gradual and coordinated way;
- Guidelines to support the progressive restoration of transport services and connectivity;
- A Recommendation on vouchers for cancelled travel with an aim of making travel vouchers an attractive alternative to cash reimbursement for consumers;
- Guidance and criteria for progressive resuming of tourism activities and for developing health protocols for hospitality establishments.
Parliament votes on Resolution calling for contingency budget proposal
The European Commission is expected to present a new proposal for an increased EU multiannual financial framework (MFF) 2021-2027 to support the COVID-19 recovery. However, due to expectations of a delay before the start of the budget’s implementation, the European Parliament today (13 May) voted on a resolution urging the Commission to present a contingency budget proposal by 15 June. The aim of the contingency budget would be to provide a safety net and avoid disruption for citizens, farmers, companies and organisations benefitting from EU programmes. The Parliament underlined that the proposal should refocus the budget temporarily on mitigating the consequences of the COVID-19 crisis and helping in the recovery by adding flexibility and funding.
Furthermore, during today’s session, the Parliament held an exchange with Commission President Ursula von der Leyen on the expected amended MFF and the EU recovery plan. A resolution will be put to the vote on Thursday and Friday.
Industrial production decreased by 10.4% in the EU since the COVID-19 outbreak
According to Eurostat, the EU’s industrial productivity in the period from February 2020 to March 2020 fell by 10.4% in the EU and by 11.4% in the Eurozone. More specifically, the production of durable consumer goods decreased by 24.2%, whereas the production of capital goods and intermediate goods fell by 21.5% and 11.8%, respectively. In terms of the geographical spam, the EU member states experiencing the highest decrease of industrial productivity include Luxembourg with 32.7%, Italy with 29.3% and Slovakia with 19.6%.
Update 12 May 2020
Timmermans calls on member states to take lead on green state aid
The European Commission amended and extended its temporary rules on State Aid on 8 May 2020, but it fell short of attaching climate-related conditions to the approvals of member states’ state aid. Instead, the Commission leaves it to member states’ governments to add ‘green’ conditions to bailouts as they see fit. This was underlined in a video call of 11 May 2020, in which Frans Timmermans, Commission’s Executive President for the European Green Deal, urged national governments to also take the lead on granting state aid under “green” conditions. Furthermore, Timmermans emphasized once again that the European Green Deal and green investments will guide the EU’s economic recovery.
Commission announced eight research projects to develop COVID-19 treatment and diagnostics
The European Commission announced eight new major research projects identified in the framework of the public-private Innovative Medicines Initiative (IMI), which was launched in March 2020. After being selected during a fast-track call for proposals, the projects will be receiving financial support of €72 million (previously planned €45 million) from the European Commission and €45 million provided by the pharmaceutical industry. The projects will address the medical needs after the COVID-19 outbreak with five projects focusing on diagnostics and three on treatments. It is expected that 94 organization (universities, research institutes, companies, etc.) will be involved in the implementation of the funded projects.
Southern EU member states put forward a request for EU’s recovery fund based on grants
In a note sent to the Commission’s cabinet, five Southern EU member states – Italy, France, Portugal, Greece and Cyprus – put forward their request for the EU’s new Recovery Fund. In particular, the five member states argue that the future fund must provide a very substantial part in grants to confront the negative consequences of the COVID-19 outbreak. Moreover, they call for a distribution mechanism targeted towards the sectors and geographical parts of Europe which were most affected by the pandemic.
Update 11 May 2020
Eurogroup reached an agreement on Pandemic Crisis Support of European Stability Mechanism
In their meeting of 8 May 2020, the finance ministers of the Eurogroup reached an agreement on the European Stability Mechanism (ESM) Pandemic Crisis Support Instrument. The Eurogroup agreed to the following features of the Pandemic Crisis Support, which is available to all euro area member states for amounts of 2% of the respective Member’s GDP as of end-2019:
- Commitment by member states to use the credit line to support domestic financing of direct and indirect healthcare, cure and prevention-related costs due to the COVID-19 crisis;
- As proposed by the Commission before the meeting, monitoring and surveillance will be proportionate with the features and use of the Pandemic Crisis Support;
- Maximum average maturity of 10 years for the loans.
Member states may request for Pandemic Crisis Support until 31 December 2022.
Commission’s President responded to the ruling on ECB purchase measures
The president of the European Commission, Ursula von der Leyen reacted in an official statement to the last week’s decision on the ruling of the German Constitutional Court, in which the Court argued that public sector purchase program (PSPP) of the European Central Bank (ECB) did not respect the principle of proportionality. Von der Leyen stated that the European Union’s monetary policy is a matter of exclusive competence and that the EU law has primacy over national law, emphasizing that the rulings of the European Court of Justice are binding on national courts. Furthermore, the Commission President announced that the Commission will analyse the German Court’s ruling in detail, and it might consider launching the infringement procedure against Germany.
Commission considers setting up a fund to take equity stakes in systemic EU companies
According to the European Commission’s Executive Vice-President for Economy, Valdis Dombrovskis, the Commission is considering creating an EU-wide fund that would acquire equities of systemic companies in the EU. The Fund’s primary focus would be on indebted EU member states in the South and in the East that are not able to provide strong financial incentives for its companies. Furthermore, the fund would be linked with the EU’s Multiannual Financial Framework (MFF) and would highly likely be financed through a new investment scheme in the framework of the European Investment Bank’s (EIB) program “InvestEU”. Although it is still open for alterations, the current proposal foresees a fund of €16 billion that could generate up to €200 billion investments.
The proposal has received support by some member states, such as France, which emphasized that such a fund would prevent hostile acquisitions of weak companies by non-EU actors.
Commission rejects selective openings of national borders
As the European Commission asks member states to gradually lift national border controls, Home Affairs Commissioner Ylva Johansson underlined in a video conference with the European Parliament’s Committee on Civil Liberties that the Commission will oppose selective border openings. According to Johansson, nationality will not decide on the possibility of entering and leaving the EU.
On 13 May, the Commission is expected to adopt a broad package of sectoral guidelines for exit strategies in the tourism and transport sectors, including guidelines on lifting of internal borders and a communication on the assessment of the application of the temporary restriction on non-essential travel to the EU.
Commission extends the Temporary Framework on State Aid
The European Commission decided to amend its Temporary Framework on State Aid adopted on 19 March 2020 to confront the negative economic developments in the wake of the COVID-19 outbreak. The new amendment will complement the existing framework and will allow Member States to provide well-targeted recapitalizations and subordinated debt to companies. This amended Temporary Framework will stay in force until 31 December 2020, unless the European Commission adopts an extension of the implementation period.
Update 8 May 2020
Commission to adapt rules on use of the Pandemic Crisis Support of the European Stability Mechanism
In a letter to Eurogroup President Mário Centeno sent ahead of today’s videoconference of Eurozone finance ministers, Paolo Gentiloni, EU-Commissioner for Economy, and Valdis Dombrovskis, Executive Vice-President for economy, announced to amend the European Stability Mechanism’s (ESM) rules on surveillance in context of the proposed ESM Pandemic Crisis Support instrument. According to EU rules, member states benefitting from financial assistance from the ESM are subject to enhanced surveillance by the Commission.
However, given the specific and limited scope of the Pandemic Crisis Support, the Commission announced to focus its monitoring and the reporting requirements solely on the actual use of the instrument’s funds with regard to direct and indirect healthcare, cure and prevention related costs, and refrain from conducting ad hoc on-site missions.
Revision of the MFF to give more prominent role to the EU’s own resources
Although previously scheduled for the 6 May 2020, the European Commission did not yet present the amended proposals for the EU’s multiannual financial framework (MFF) 2021-2027 and the EU Recovery Fund. However, both proposals were recently leaked.
According to the leak, the Commission wants to increase and front-load cohesion, investment and resilience funding. The increased EU’s budget for the next seven years would be financed through MFF Own Resources, a temporary Recovery Instrument and debt raised on international markets. In this case, member states‘ contributions would not increase. The European Parliament President, David Sassoli, welcomed the new Own Resources, emphasising that these instruments should be a permanent part of the MFF.
ECB published Survey on the Access to Finance of SMEs
Based on the Survey on the Access to Finance of Enterprises published on 8 May 2020, the European Central Bank (ECB) reported a rapid deterioration of economic situation in the COVID-19 crisis with SMEs turnover going from 20% in the previous six months to current -2% in net terms. Furthermore, the SME’s expectation about the availability of bank loans deteriorated during the crisis, especially among Italian, French and Spanish SMEs. In addition, the main concerns of the SMEs for the following period include the lack of availably of skilled labor as well as difficulty in finding customers.
On 13 May, the Commission is expected to adopt a broad package on tourism, transport and borders in the context of the coronavirus crisis.
Update 7 May 2020
MEPs call on Commission to include Parliament in drafting of Recovery Plan
The President of the European Parliament, David Sassoli called the European Commission to make sure that the Parliament is the “key player” in the process of preparing the Recovery Plan, emphasizing that MEPs have to have a say on financial investments of the Union. Furthermore, the EPP Chairman Manfred Weber warned the Commission that the EPP group will vote against the next Multiannual Financial Framework (MFF) if the Parliament is ignored in the preparation process.
The European Commission has not yet presented the revised proposal for the MFF 2021-2027 that would incorporate the Recovery Plan though previously announcing to do so until 6 May 2020.
Eurogroup to discuss the German Constitutional Court decision on ECB purchase measures
The finance ministers of the Eurozone will analyze the decision of the German Constitutional Court during a videoconference on 8 May 2020, however, they will not take an official position.The court ruled that the European Central Bank (ECB) did not respect the principle of proportionality when implementing public sector purchase program (PSPP). After the decision was published on 5 May 2020, the ECB reacted to it by declaring that it “remains fully committed to doing everything necessary within its mandate”. In addition, it pointed out that its actions are based on the previous rulings of the European Court of Justice.
In the framework of tomorrow’s meeting, the ministers will also exchange views on the economic situation in the euro area based on the Commission’s Spring forecast and discuss the Pandemic Crisis Support instrument of the European Stability Mechanism (ESM). It is expected to make the instrument operational by 1 June 2020.
Commission to present sectoral guidelines on exit strategies for tourism and transport sector
The European Commission will present sectoral guidelines for exit strategies in the tourism and transport sectors on 13 May 2020. Following up on the joint EU roadmap towards lifting COVID-19 emergency measures, the package of sectoral guidelines would include following measures:
- Guidelines on the lifting of internal borders;
- Guidelines on safe and healthy resumption of passenger transport;
- Health and safety protocols for main tourism locations;
- Communication on tourism in the context of the COVID-19 pandemic.
Eurostat publishes numbers on volume of retail trade in March 2020
Eurostat, the statistical office of the European Commission, published numbers on the volume of retail trade in March 2020, underlining the significant negative impact of the COVID-19 containment measures introduced by member states. The numbers for March as compared to the previous month and the year 2019 are the following:
- The seasonally adjusted volume of retail trade decreased by 11.2% in the euro area and by 10.4% in the EU, compared with February 2020.
- In March 2020 compared with March 2019, the calendar adjusted retail sales index decreased by 9.2% in the euro area and by 8.2% in the EU.
Update 6 May 2020
Commission publishes first economic forecast in COVID-19 crisis
The European Commission published the Spring 2020 Economic Forecast, showing the negative economic impact to the EU economy caused by the coronavirus pandemic. The Commission’s forecast projects following scenario for growth, unemployment, inflation and government deficit:
- The euro area economy will contract by a record 7.7% in 2020 and grow by 6.2% in 2021, whereas the EU economy is forecast to contract by 7.5% in 2020 and grow by around 6% in 2021;
- The unemployment rate in the euro area is forecast to rise from 7.5% in 2019 to 9.5% in 2020 before declining again to 8.5% in 2021, whereas in the EU, the unemployment rate will rise from 6.7% in 2019 to 9% in 2020 and then fall to around 8% in 2021;
- Inflation in the euro area, as measured by the Harmonised Index of Consumer Prices, is now forecast at 0.2% in 2020 and 1.1% in 2021, while for the EU, inflation will be at 0.6% in 2020 and 1.3% in 2021;
- The aggregate government deficit of the euro area and the EU is expected to surge from just 0.6% of GDP in 2019 to around 8.5% in 2020, before falling back to around 3.5% in 2021.
MEPs call for banking and capital markets union to be completed
The members of the European Parliament’s Committee on Economic and Monetary Affairs (ECON) discussed in a meeting on 5 May 2020 the economic impacts of the COVID-19 crisis with Andrea Enria, the chairperson of the Supervisory Board of the European Central Bank (ECB), and Elke König, the chairperson of the Single Resolution Board (SRB), the central resolution authority within the Banking Union. The ECON Committee raised doubts on the flexibility of the EU’s banking framework to ensure banks can continue to support the economy. Furthermore, they stressed the need to complete the banking and capital markets unions to allow for an efficient response to the crisis.
Council of the EU adopts an assistance package to support neighboring countries
In order to confront the negative economic disruptions of the COVID-19 outbreak, the Council of the EU adopted the proposal of the European Commission presented on 22 April 2020 to provide macro-financial assistance of €3 billion in the form of loans on highly favorable terms to enlargement and neighborhood partners of the EU. More specifically, these measures aim at contributing to the immediate financing needs, enhancing macroeconomic stability as well as easing the negative socio-economic developments of the COVID-19 pandemic. The EU partners receiving the highest financial assistance will include Ukraine (€1200 million), Tunisia (€600 million), Bosnia-Herzegovina (€250 million), Jordan (€200 million) and Albania (€180 million).
Update 5 May 2020
European Parliament’s Committee on Budgets requests MFF contingency plan
In a legislative initiative report adopted on 04 May 2020, Members of the Committee on Budgets of the European Parliament requested the European Commission to submit a proposal for a contingency plan for the next year’s budget by 15 June 2020. The aim is to provide a safety net for beneficiaries of EU programs in case the adoption of the next multiannual financial framework (MFF) for 2021-2027 will be delayed due to the amendment of the MFF in light of a COVID-19 recovery and reconstruction package. According to the MEPs, a contingency plan could provide a better basis than a late and inadequate MFF for the European Union’s recovery and political priorities.
German Constitutional Court ruled on ECB’s purchase measures
The German Constitutional Court ruled on 5 May 2020 on the public sector purchase program (PSPP), an instrument launched in 2015 by the European Central Bank (ECB). At issue were so-called quantitative easing asset purchases, which allowed the ECB to purchase government debt of the Eurozone member states. The German court upheld complaints against the ECB, arguing that the PSPP did not respect the principle of proportionality. According to the court, the German government and the Bundestag failed to scrutinise the objectives of the ECB’s program. As a result, the German judges instructed both to request from the ECB a “proportionality assessment” of the bond-buying program.
Although this decision refers to the ECB’s measures introduced before the COVID-19 crisis, today’s ruling may open the door to legal challenges against the current ECB’s pandemic emergency purchase program (PEPP) worth €750 billion.
More than 50 CEO from financial and banking sector join the “green recovery alliance”
The green recovery alliance launched on 14 April 2020 in the European Parliament advocating the Green Deal as the basis of the EU’s recovery plan from the COVID-19 crisis was joined by more than 50 CEOs from financial and banking sector. Some of these stakeholders represent largest European financial companies, such as AXA, Allianz, BBVA, BNP Paribas Asset Management, Nordea Life & Pension, PensionDanmakr, and Santander. The signatories stated that they are committed to supporting EU transformation programs that put biodiversity and fight against climate change at the center of EU’s economic policies.
Germany accounts for more than a half of the emergency state-aid approved by the Commission
Since adoption of “Temporary Framework” by the European Commission, giving the Member States the full flexibility provided for in the EU rules on state aid, Germany has accounted for the 52% of the total emergency state aid approved on the EU level so far. This raised concerns about the level playing field on the single market after the crisis, which will considerably be affected by different state aid support given. However, the Executive Vice-President of the Commission, Margrethe Vestager perceives this development as positive for the EU, since the assurance of liquidity for national companies by Germany could work “as a locomotive” for the whole Europe.
Update 4 May 2020
EU-led initiative to fundraise €7.5 billion to fight COVID-19 pandemic
With an aim to develop and deploy effective diagnostics, treatments and a vaccine to confront the outbreak of the COVID-19 on a global scale, the European Union and its partners intend to raise €7.5 billion in the framework of the “Coronavirus Global Reponse Pledging Conference” starting on 4 May 2020. This fundraising initiative would make up for the shortfall of global funding to address the most urgent threats estimated by the Global Preparedness Monitoring Board (GPMB), an international group launched by the World Bank and the World Health Organization (WHO).
ECB publishes results on inflation, growth and unemployment rate forecasts
The results published in the framework of the Survey of Professional Forecasters (SPF) of the European Central Bank (ECB) show the significant impact of the COVID-19 crisis and subsequent mitigation measures on inflation, growth and unemployment rate forecasts for the years 2020, 2021 and 2022:
- HICP inflation expectations for shorter horizons were revised down: averaging 0.4%, 1.2% and 1.4% for 2020, 2021 and 2022, respectively. The longer-term expectations remain unchanged at 1.7%;
- Real GDP growth expectations for 2020 and 2021 revised significantly – averaging -5.5% and 4.3% for 2020 and 2021, respectively;
- Unemployment rate expectations revised up by 1.9, 1.5 and 1.1 percentage points for 2020, 2021 and 2022, respectively.
Commission adopts support measures for the agricultural and food sector
The European Commission adopted a package of financial measures to provide further support to the agricultural and food sectors which are most affected by the COVID-19 crisis. These measures, which the Commission proposed on 22 April 2020, include:
- Private storage aid for dairy and meat products;
- Flexibility for market support programs and reorientation of funding priorities towards crisis management measures;
- Temporary derogation from EU competition rules.
In addition, the Commission proposed to allow Member States to use remaining rural development funds to offer farmers and small agri-food businesses support of up to €5,000 per farmer and €50,000 per small business.
Update 30 April 2020
ECB adopts new measures to support the Eurozone economy
During a teleconference, the Governing Council of the European Central Bank (ECB) took new monetary policies decisions to support the Eurozone economy in times of the COVID-19 crisis. These include:
- Reduction of the interest rate on targeted longer-term refinancing operations (TLTRO III) in the time period from June 2020 to June 2021;
- New wave of seven non-targeted pandemic emergency longer-term refinancing operations (PELTROs);
- The interest rate on the main refinancing operations remains unchanged at 0.00%;
Purchases under the asset purchase programme (APP) will continue at a monthly pace of €20 billion.
The ECB stated that it is fully prepared to increase the size of the Pandemic Emergency Purchase Programme (PEPP) and change its structure if needed to stabilize the Eurozone banking system. In a press conference following the meeting, ECB President Christine Lagarde additionally stated that the COVID-19 crisis set the eurozone in an “unprecedented decline” that is likely to steepen before a recovery phase begins.
Eurostat published economic data for the euro area on unemployment, GDP and inflation
Eurostat, the statistical office of the European Commission, published economic data for the euro area following the COVID-19 outbreak. Eurostat published the following figures, underlining the negative economic impact of the crisis:
- Seasonally adjusted GDP decreased by 3.8% in the euro area and by 3.5% in the EU during the first quarter of 2020, compared with the previous quarter;
- The euro area seasonally adjusted unemployment rate in March 2020 was 7.4%, up from 7.3% in February 2020;
- In April 2020, euro area annual inflation is expected to be 0.4%, down from 0.7% in March 2020.
Update 29 April 2020
Commission adopts banking package to facilitate lending to households and businesses in the EU
The European Commission adopted a banking package to ensure continuous bank lending to households and businesses throughout the European Union to help mitigate the economic impact of the COVID-19 crisis. In an Interpretative Communication, the Commission encourages banks and supervisory authorities to make use of the flexibility in the EU’s accounting and prudential frameworks, while acting responsibly.
Moreover, the Commission proposed legislative changes, which include exceptional temporary measures amending EU banking rules to maximise the capacity of credit institutions to lend and absorb losses. The proposals include:
- Adapting the timeline of the application of international accounting standards on banks’ capital;
- Treating more favourably public guarantees granted during this crisis;
- Postponing the date of application of the leverage ratio buffer;
- Modifying the way of excluding certain exposures from the calculation of the leverage ratio.
The legislative proposals will be discussed by the European Parliament and the Council and will be likely adopted in June 2020.
Ursula von der Leyen calls European Green Deal “motor for the recovery”
In the framework of a video statement, the President of the European Commission, Ursula von der Leyen, highlighted the crucial importance of the European Green Deal for the EU’s economy after the COVID-19 crisis, calling it “the motor for recovery”. Furthermore, she stated that the Green Deal should be used as a “compass” to rebuild the European economies “differently and make them more resilient”. In this line, German Chancellor Angela Merkel welcomed the determination of the Commission and pointed out that recovery plans and financial allocations must take into consideration the impact on climate.
MEP Lange calls on Commission to ensure crisis-resistant value chains in Europe
The Chair of the Committee for International Trade of the European Parliament, Bernard Lange, urges the European Commission to present legislation for sustainable and crisis-resistant value chains in Europe. As the COVID-19 outbreak is forcing businesses to adjust the structure of their value chain, Lange calls for new regulations that “should oblige businesses to assess human right, environmental risks as well as vulnerability to crisis” in order to avoid such risks in the aftermath of the crisis.
Commission approves German umbrella scheme to support research and development of coronavirus relevant products
The European Commission approved a German umbrella scheme to support research, development, testing and production of coronavirus relevant products. The scheme aims to enhance both the development and the production of products directly relevant to the coronavirus outbreak. Therefore, it supports:
- Coronavirus relevant research and development (R&D) activities;
- Investments into testing and upscaling infrastructures that contribute to developing coronavirus relevant Medicinal products;
- Investments into production facilities for medicinal products needed to respond to the outbreak.
The measure allows aid to be granted by German authorities at all levels and is open to all enterprises capable to carry out such activities in all sectors.
Update 28 April 2020
Commission considers new financial instrument to support companies at risk of insolvency
The European Commission considers the creation of a new financial instrument to provide support to companies which are at risk of insolvency, especially targeting vulnerable member states. In a remote hearing with the European Parliament, Commission Vice-President for economy, Valdis Dombrovskis, underlined that the mechanism would help avoid any widening of economic, social and political divergences across countries or regions in Europe due to the crisis.
The new mechanism would come as part of the updated proposal of the multi-annual financial framework and the recovery fund, expected by mid-May.
Nine EU Tourism Ministers call for a strong support for tourism in the EU Recovery Plan
As tourism represents one of the most affected sectors by the COVID-19 outbreak, the Tourism Ministers of Bulgaria, Cyprus, France, Greece, Malta, Italy, Portugal, Romania and Spain called on the EU to include short and medium term measures in the EU recovery plan with the goal of financially supporting the tourism industry. These measures aim to ensure the survival of the economic activities linked to tourism and to help companies in the tourism industry to stay competitive. Furthermore, the ministers argued that the homogenous rules for recovery of sea and land cross-border mobility are a crucial prerequisite for the revival of tourism.
European Central Bank published bank lending survey for the first quarter of 2020
The European Central Bank (ECB) presented its Bank Lending Survey (BLS) based on the feedback from 144 Eurozone banks for the first quarter of 2020. The survey identified following trends:
- Credit standards for loans to enterprises and households tightened. This is expected to change in the next quarter on the account of the supportive measures introduced by the Eurozone governments.
- Companies’ demand for loans surged in the first quarter of 2020 due to liquidity needs.
- ECB’s measures, such as asset purchase programme, have contributed positively to banks’ liquidity positions and market financing conditions.
- ECB’s measures also had an easing impact on bank lending conditions and a positive impact on lending volumes.
EIB approved €5 billion investment for businesses and medical technology
As a part of its response to the COVID-19 crisis, the European Investment Bank (EIB) approved €5 billion of new financing for businesses affected by the economic shock as well as for medical technology. The financial package includes €3 billion of investments dedicated for Italian and Spanish companies. Furthermore, the EIB agreed on additional flexibility to extend existing EIB loans to mitigate the economic impact of the pandemic.
Within the context of the EIB’s dedicated Infectious Disease Financing Facility, the EIB Board additionally approved a €75 million equity investment into the German company Curevac to provide support for medical research.
Update 27 April 2020
Merkel announced changes in priorities of German EU Council Presidency
German Chancellor Angela Merkel underlined in a video podcast the changes in priorities of the German EU Council Presidency, which will begin in the second half of the year. According to the Chancellor, the German Presidency will primarily focus its activities on the fight against the COVID-19 crisis. Furthermore, Merkel pointed out three policy areas of action which will be at the top of the German Presidency’s agenda:
- Revitalisation of the European economy and social cohesion;
- Climate and environmental issues, with climate policies playing a central role in recovery plans;
- Establishment of efficient European health systems in all member states.
The Chancellor further added that issues, such as financial transaction tax and “minimum taxes” in EU countries will also be on the agenda. It remains to be seen whether these instruments are intended to aid financing of the revitalisation of the European economy or represent separate policy areas.
Gentiloni calls for an EU Recovery Fund of €1.5 trillion to be ready until mid-September
The European Commissioner for Economy, Paolo Gentiloni, said that the EU countries need a large recovery fund of up to €1.5 trillion to counter the negative economic consequences of the COVID-19 crisis. Moreover, he pointed out that such a fund should be put at the member states’ disposal as soon as possible and preferably until mid-September.
The Netherlands presented a proposal for a ‘green’ EU Recovery Fund
Ahead of the European Council Meeting last week, the Netherlands circulated a proposal to establish a ‘green’ Recovery Fund to confront the negative economic impact of the COVID-19 crisis. The proposal presents the idea of creating “an exclusion list” of economic activities, which would not be entitled to receive EU financial support due to their negative impact on climate and environment. In addition, the allocation of funds within the green EU Recovery Fund would be guided by the sustainable/green finance taxonomy which motivates investments in green technologies and businesses, according to the proposal.
This opinion is expected to be taken into consideration by the Commission when preparing the proposal for the EU Recovery Fund that will be presented in the second or third week of May.
Update 24 April 2020
European Council: Member States seek common ground for “Phase 2”
The leaders of the EU member states held a videoconference to address next steps in combating the negative consequences of the COVID-19 outbreak. After renewing their commitment to address the crisis in a coordinated manner, the leaders took decision on following issues:
- Joint Roadmap for Recovery: European Council welcomed the initiative and underlined the necessity of the Union’s strategic autonomy as well as producing essential goods in Europe.
- Eurogroup’s financial package of €540 billion: EU leaders endorsed the package and emphasized that the package should become operational until 1 June 2020.
- Recovery Fund: European Council agreed to establish a fund, targeted towards the sectors and geographical regions affected most by the COVID-19 crisis. The European Commission was tasked with presenting a proposal for such a fund and clarifying its link with the multiannual financial framework (MFF).
- Joint European Roadmap towards lifting of COVID-19 containment measures: EU leaders welcomed the proposal and decided to ensure a gradual lifting of restrictions in a coordinated manner.
von der Leyen outlines the core elements of the next EU-Budget
Following the videoconference of the European Council, Commission President Ursula von der Leyen addressed the potential outlook of the next multiannual financial framework (MFF). Von der Leyen underlined that the Commission will adapt the new MFF to the post-crisis circumstances, implying an increase of its capability to generate necessary investment. To that end, based on the legal guarantees by the EU member states, the Commission will raise funds on the financial markets and channel them through the MFF to the member states. The four focus areas of future investment would include:
- Support for investment and reforms in Member States and cohesion;
- European Green Deal, digital transition and increased strategic autonomy;
- Resilience of EU’s common crisis response tools;
- Support to EU’s neighbourhood and partners.
Commission’s leaks seen by PANTARHEI ADVISORS suggest that the Commission plans on integrating the Recovery plan agreed by the European Council and the MFF, generating a potential amount up to €2 trillion of investments. The Commission will present the proposal for the next MFF on 6 May 2020.
Update 23 April 2020
ECB adopts measures to alleviate effects of possible rating downgrades on collateral availability
To confront the economic consequences of the COVID-19 crisis, the European Central Bank (ECB) adopted measures to alleviate effects of possible rating downgrades on collateral availabilities. These measures add to the collateral easing package adopted on 7 April 2020 and aim at ensuring that banks have sufficient assets to mobilize as collateral to continue providing funding to the economy.
More specifically, the ECB will from now on allow the eligibility of assets that were in line with the credit quality requirements on 7 April 2020 in case of a deterioration in credit ratings in the future as long as the ratings remain above a certain credit quality level (BB rating). These measures will remain in force until September 2021.
EIB and five national promotional banks start cooperation in the fight against COVID-19
The European Investment Bank (EIB) together with the five largest European National Promotional Banks – CDC-BPI (France), KfW (Germany), CDP (Italy) BGK (Poland) and ICO (Spain) – held the first virtual meeting to combine their efforts and focus on synergies in the fight against the COVID-19 crisis. Discussing responses to the economic consequences of the pandemic, the informal “5+1” group has committed to explore possible common initiatives and new tools along with the existing ones at the European level.
Update 22 April 2020
European Council President and the Commission circulated a roadmap for recovery
Ahead of the European Council Meeting on Thursday, the President of the European Council, Charles Michel, and the European Commission presented a “Roadmap for Recovery”. The Roadmap emphasizes the need to ensure the strategic autonomy of the EU by producing critical goods in Europe, investing in strategic value chains and by reducing over-dependency on third countries. In addition, the document prioritizes the green transition and digital transformation as the core elements of the EU post-crisis recovery In this context, Frans Timmermans, the Executive President for the European Green Deal, underlined that “every euro” spent on economic recovery measures after the COVID-19 crisis would be linked to the green and digital transitions.
In terms of financing, the document underlined the need for a “Marshall Plan” type investment effort to support the recovery of economy. The European Commission is currently in charge of preparing a recovery plan and is expected to present a new proposal on the next multiannual financial framework (MFF) until 29 April 2020.
Commission proposes further financial measures to support agricultural and food markets
The European Commission announced exceptional financial measures to provide further support to agricultural and food markets most affected by the COVID-19 crisis. The Commission’s package includes measures for:
- Private storage aid in the dairy and meat sectors;
- Flexibility in fruits and vegetables, wine and some other market support programmes;
- Derogation from EU competition rules by allowing operators to adopt self-organisation market measures to stabilise the market.
Update 21 April 2020
Commission will propose borrowing from financial markets to finance the recovery
During the exchange of views in the European Parliament’s Committee on Regional Development, Valdis Dombrovskis, Executive Vice President of the European Commission emphasized that in order to enhance the financing capacity of the following multiannual financial framework (MFF) 2021-2027, the Commission will create an additional fund to support the post-crisis recovery. The latter would be financed from borrowings in the financial markets; however, its specific provisions remain to be discussed. This statement demonstrates and confirms the Commission’s support for generating common EU debt to financially support the EU recovery plan.
On Monday, 20 April 2020, the German Chancellor Angela Merkel also expressed readiness to support post-crisis recovery through a larger MFF as well as the creation of joint debt in the framework of the existing treaties.
A green and digital Europe as part of the EU’s recovery plan after the COVID-19 crisis
Ursula von der Leyen, President of the European Commission, underlined in an interview the importance of the EU’s growth strategy, the European Green Deal, digitalisation and decarbonisation as the basis of the EU’s recovery plan after the pandemic. To this end, the next EU’s multiannual financial framework (MFF) 2021-2027 will play a central role in the economic recovery.
Update 20 April 2020
Commission approves Austrian guarantee schemes to support SMEs
The European Commission approved Austrian guarantee schemes to support small and medium-sized enterprises (SMEs) which are affected by the coronavirus outbreak. The schemes were approved under the Commission’s State aid Temporary Framework.
The schemes will provide guarantees on working capital loans to enable SMEs to cover their short-term liabilities in order to counter the current loss of revenues caused by the crisis. Therefore, the schemes will provide:
- 100% guarantees for underlying loans up to an amount of €500,000 (in the agricultural, fisheries and aquaculture sectors, the 100% guarantees are limited to loans up to €100,000 and €120,000, respectively);
- 90% guarantees for underlying loans up to an amount of €25 million for loans above those thresholds.
The schemes complement the €15 billion Austrian liquidity scheme that the Commission approved on 8 April 2020.
COVID-19 crisis might result in the loss of 59 million jobs in the EU
According to an analysis from the consulting company McKinsey, the COVID-19 pandemic puts at risk 59 million jobs in the EU. These job losses could result in an increase of unemployment in the EU to 11.2% by 2021 in case current measures stay in place through the summer. The sectors that will be affected the most by the job loss include food and accommodation, arts and entertainment, and retail and wholesale. Moreover, the future unemployment crisis will highly likely have a negative impact on younger workers and workers with less education.
McKinsey calls the political decision-makers to accelerate its economic actions to conform the COVID-19 outbreak and to support redeploying workers to critical sectors mentioned above.
Update 17 April 2020
Council of the EU advocates continued bank lending and protection of European companies from takeovers
In a videoconference on Thursday (16 April), the EU finance ministers called on European banks to use freed capital and available profits to extend credits to households and businesses in a way that would ensure economic continuity during the COVID-19 crisis. In a similar vein, they urged insurance companies to take measures to preserve their capital position and to continue to act in the best interests of consumers.
On the same day, the ministers in charge of trade issues pointed out that strategic companies weakened by the crisis are in danger of being taken over by companies from non-EU countries. To that end, the ministers agreed to work together to prevent these so-called “predatory” takeovers.
European Parliament adopts additional measures to fight outbreak of COVID-19
During its mini plenary session on 16 and 17 April 2020, the European Parliament adopted additional measures proposed by the European Commission to confront the COVID-10 outbreak:
- “Corona Response Investment Initiative Plus”, introducing exceptional flexibility for the use of the European Structural and Investments Funds;
- Additional funds of €3.08 billion from the EU budget channeled mainly through the Emergency Support Instrument and through rescEU to support the EU health sector;
In addition, the Parliament adopted a resolution, in which it welcomed the EU’s economic response to the COVID-19 crisis. It also called for a massive recovery package to be supported by an increased multiannual financial framework (MFF). Lastly, it emphasized that the Green Deal and the digital transformation should be the basis of the post-crisis recovery of the economy.
French President advocates an EU Recovery Fund that could issue common debt
The French President Emmanuel Macron expressed his support for setting up a joint EU fund to issue common debt in order to financially assist member states in tackling the COVID-19 outbreak. The latter would amount to about €400 billion and would represent an additional tool to other measures already adopted by the EU institutions. This idea is strongly supported by the southern EU member states (Italy and Spain), whereas the financially more stable member states, such as Germany and the Netherlands, oppose the proposal.
Update 15 April 2020
Commission might postpone some legislative initiatives
Based on the leaked Annual Work Programme of the Commission seen by PANTARHEI ADVISORS, the Commission is likely to postpone the official timeline for some major legislative initiatives planned for 2020 to the following year. The outbreak of the COVID-19 crisis and the political response to it have resulted in a limited capacity of the European Parliament and the Council of the EU, as well as the capacity of the Commission services to deliver planned legislative acts in time. However, the Renewed Sustainable Finance Strategy, an integral part for financing the Green Deal as well as a sustainable recovery after the crisis, remains on track, according to the leaked document.
Commission presented European roadmap to phase-out containment measures
The Commission has put forward a European roadmap to phase-out the COVID-19 containment measures with concrete recommendations for Member States. These include:
- Gradual phase-out of containment measures in order to measure the impact;
- General measures should progressively be replaced by targeted ones (e.g. for high-risk groups);
- Internal border controls should be lifted in a coordinated manner;
- The re-start of economic activity should be encouraged;
- Gatherings of people should be progressively permitted (schools, commercial activity, etc.);
- Efforts to prevent the spread of the virus should be sustained;
After the containment measures are gradually lifted, the Commission will develop and present a Recovery plan, based on a new proposal for the next Multiannual Financial Framework.
Update 14 April 2020
French and German ministers join group of ten EU environment ministers calling for a green recovery
French and German ministers have signed a joint letter of ten EU climate and environment ministers advocating the Green Deal as the basis of the EU’s recovery plan from the COVID-19 crisis. It is expected that the Greek environment minister will join the group soon, raising the total number of signatories to 13.
In line with this, an additional “green recovery alliance” was launched on Monday (14 April) in the European Parliament with the same goal at the initiative of Pascal Canfin, chair of the environment committee. In addition to 79 Members of the Parliament, the alliance brings together civil society groups, business associations, the European trade union confederation, NGOs and think tanks.
Council of the EU adopts amended EU budget for 2020
The Council of the EU adopted two proposals to amend the EU budget for 2020 in order to make available almost all the remaining money from this year’s budget to respond to the COVID-19 crisis. Taking into consideration both proposals, commitments have been increased overall by €3.57 billion and amount to €172.2 billion, whereas payments have been increased by €1.6 billion, reaching a total of €155.2 billion. The increased funds will largely be used to support medical supplies, construct field hospitals, and transfer patients for treatment to other member states.
The European Parliament is now expected to agree on its position on the two draft amending budget proposals during its plenary on 16-17 April 2020. Once an agreement is reached, the budget will be adopted.
Prospects of financing the proposed EU recovery fund
In the framework of the agreed package of financial measures last week, the Eurogroup proposed a Recovery Fund to prepare and support the recovery of the EU economy. Valdis Dombrovskis, the Commission’s Executive Vice-President, expressed his support for the fund and underlined the possibility of financing such a recovery fund with the controversial “European bonds”. In his opinion, these bonds would be able to generate up to €1.5 trillion backed by a guarantee from member states.
EU heads of states and governments will come together in a video conference on 23 April 2020 to discuss the next steps concerning the recovery phase.
Update 10 April 2020
Eurogroup agrees on a financial package of €540 billion to support the economy in the COVID-19 crisis
During a videoconference on Thursday (9 April), the Eurogroup members have reached the agreement on the following elements of the financial package to support the EU economy:
- Commission’s temporary unemployment reinsurance scheme (SURE) amounting to €100 billion;
- Credit lines from the European Stability Mechanism (ESM) that will be available within two weeks (€240 billion) to support domestic financing of direct and indirect healthcare, cure and prevention related costs;
- Initiative of the European Investment Bank (EIB) to create a guarantee fund of €25 billion, which could support EUR 200 billion of financing for companies with a focus on SMEs.
The Eurogroup stated that the next EU Multiannual Financial Framework (MFF) will play a central role in the economic recovery. The finance ministers have furthermore proposed a Recovery Fund to prepare and support the recovery of the EU economy. The latter would be temporary and its legal and practical aspects are still to be determined. The controversial issuing of the so-called coronabonds was not part of the discussions.
Ten EU climate and environment ministers advocate European Green Deal as basis for COVID-19 recovery
A joint letter signed by the climate and environment ministers of ten EU member states urges the European Commission to apply the European Green Deal as a basis and framework for the EU’s recovery plan from the COVID-19 crisis. In particular, the environment ministers from Austria, Denmark, Finland, Italy, Latvia, Luxembourg, the Netherlands, Spain, Sweden and Portugal encourage the Commission to make use of the Green Deal’s Investment Plan to “boost green recovery and a just transition”.
Update 9 April 2020
Sustainable finance will play an important role in the recovery of the EU economy
In the context of the Commission’s public consultation on the EU’s Renewed Sustainable Finance Strategy, Valdis Dombrovskis, the EU Commission’s executive vice-president in charge of the economy, underlined that creating a more sustainable and resilient economy will be a key focus of the recovery phase from the COVID-19 crisis. To this end, the Renewed Sustainable Finance Strategy, within the framework of the European Green Deal and based on the 2018 Action Plan on financing sustainable growth, will aim to mobilise needed investment.
Commission publishes guidance for companies on EU antitrust rules
The European Commission published a temporary framework communication to provide guidance on EU antitrust rules to companies, which temporarily cooperate and coordinate their actions in response to urgent situations related to the COVID-19 outbreak, including activities to increase production of hospital medicines and medical equipment.
Although such form of coordination among companies may violate EU antitrust rules in normal circumstances, in the current circumstances, such temporary cooperation is justifiable under EU antitrust law. The Commission will apply this Communication as of 8 April and until further notice.
Commission approves Austrian liquidity scheme to support the economy
The European Commission approved a €15 billion Austrian liquidity scheme to support the economy in times of the coronavirus crisis. The scheme was approved under the State aid Temporary Framework, which was adopted by the Commission on 19 March 2020 and amended on 3 April 2020. The approved liquidity measure allows for the provision of aid in the form of:
- Direct grants, repayable advances and guarantees with a maximum of €800 000;
- State guarantees for loans subject to safeguards for banks to channel State aid to the real economy;
- Subsidised public loans to companies, with favourable interest rates.
The measure allows aid to be granted by the COFAG (COVID-19 Finanzierungsagentur des Bundes GmbH). Aid is granted either directly or, in case of guarantees on loans or subsidised public loans, through credit institutions and other financial institutions.
Commission launched investment initiative ESCALAR
The European Commission launched ESCALAR, a new investment initiative developed together with the European Investment Fund (EIB) to support venture capital and growth financing for companies. The main aim of the initiative is to help companies scale up in Europe and help reinforce Europe’s economic and technological capacities. The initiative will provide up to €300 million to increase the investment capacity of venture capital and private equity funds, triggering investments of up to €1.2 billion.
Commission and High Representative present plans for EU response to support partner countries in fight against COVID-19
The European Commission and the High Representative presented their plans for the EU’s collective response to support partner countries in their efforts in tackling the coronavirus crisis. To this end, the EU aims to secure financial support amounting to more than €15.6 billion from existing external action resources. The EU’s action will focus on fighting the health crisis and resulting humanitarian needs, strengthening partner countries’ health, water and sanitation systems and their research capacities to deal with the crisis, as well as mitigating the socioeconomic impact.
Update 8 April 2020
Eurogroup could not reach an agreement on economic measures to fight the COVID-19 crisis
After several hours of discussion in a videoconference, the Eurogroup finance ministers fail to reach an agreement on the EU economic response to the COVID-19 crisis. The finance ministers were supposed to agree on at least three measures that would assist member states in their economic recovery after the crisis:
- Commission’s temporary unemployment reinsurance scheme – SURE;
- Activation of the European Stability Mechanism (ESM);
- Additional funding from the European Investment Bank (EIB).
The Eurogroup members mainly disagreed over the idea of issuing EU corona bonds and the ESM credit lines conditions. A press conference planned for Wednesday morning has been canceled and the Eurogroup negotiation will continue on Thursday, 8 April 2020.
Upcoming German Council of the EU Presidency will reprioritize its actions
According to the Permanent Representative of Germany to the EU Michel Clauß, the COVID-19 crisis will have a major impact on the upcoming Germany’s Council of the EU Presidency. This will imply a radical prioritization and reduction of specific targets previously planned in the framework of the presidency. The main focus of the German presidency will be on the ability of the EU institutions to proactively support the exit from the COVID-19 crisis as well as the reconstruction of the economy.
European Commission to present the exit strategy from the crisis after Easter
The European Commission will present its exit strategy from the restrictive measures imposed in the context of the COVID-19 crisis after Easter. The Commission’s exit strategy is expected to include guidance on coordinating a gradual rollback of public health measures and other measures impacting the functioning of the EU’s internal market.
The Commission initially planned to adopt a roadmap to exit the restrictive COVID-19 measures on Wednesday (8 April). However, with some EU member states rejecting the early adoption of such exit guidelines, the Commission postponed its adoption to the period after Easter to avoid false expectations and non-compliance with the restrictive measures in force among citizens.
European Central Bank adopted a package of temporary collateral easing measures
The European Central Bank (ECB) adopted an unprecedented set of collateral measures to mitigate the tightening of financial conditions across the euro area. The measures will collectively support the provision of bank lending by easing the conditions at which credit claims are accepted as collateral. Simultaneously, the Eurosystem is increasing its risk tolerance to support the provision of credit.
The package is complementary to other measures recently announced by the ECB, such as the Pandemic Emergency Purchase Programme (PEPP) adopted on 18 March.
Update 7 April 2020
The presidents of the EU institutions discussed the economic recovery of Europe after COVID-19 crisis
Ahead of the Eurogroup’s finance ministers meeting on Tuesday (7 April), European Council President Charles Michel and the Presidents of the European Commission, the ECB and the Eurogroup held a videoconference on 6 April 2020 to discuss the progress made in the EU’s economic response to the coronavirus crisis. The four presidents insist on the full exploitation of existing financial instruments and support the EU’s budget, the Single Market and unparalleled levels of investment, especially in green and digital technologies, as part of the answer.
The finance ministers of the Eurogroup will meet on Tuesday to discuss appropriate instruments to fight the economic consequences of the coronavirus crisis.
Commission aims to present an updated proposal for the MFF by the end of April
The European Commission plans to present an updated proposal for the EU’s multiannual financial framework for 2021-2027 on 29 April 2020. The proposal is part of the EU’s recovery strategy to counter the economic fallout of the coronavirus crisis. Commission President Ursula von der Leyen regards the MFF as the key instrument to overcome severe recession resulting from the crisis.
Update 6 April 2020
Commission and Council identify areas for investment crucial for economic recovery
Outlining first parts of an economic recovery strategy, Commission President Ursula von der Leyen underlined in a press statement the need for an investment plan in the form of a Marshall plan for Europe. According to von der Leyen, investments in innovative research, digital infrastructure, smart circular economy and transport systems in the framework of the multiannual financial framework (MFF) will be crucial to rebuild the European economy.
In a similar vein, leaked draft Council conclusions identified e-Health, digital education, e-Government, data sharing and broadband connectivity as important fields for investment in the time following the COVID-19 crisis. In contrast to the Commission president’s plan to run the MFF for the beginning of next year, a minority of Council members also raised the idea of a “wartime” extraordinary budget, delaying the regular MFF for one or two years.
Commission and European Investment Fund have allocated €8 billion for 100,000 SMEs
The European Commission has unlocked €1 billion from the EU Budget (Horizon 2020) that will serve as a guarantee to the European Investment Fund (EIF). The €1 billion will allow the EIF to provide special guarantees to banks and other lenders to provide liquidity to at least 100,000 European SMEs for estimated €8 billion in available financing.
The new financial support should start flowing to businesses already in April. SMEs will be able to apply directly to their local banks and lenders participating in the scheme.
Update 3 April 2020
EU Members States debate possible financial measures ahead of the Eurogroup Meeting
To counter the economic fallout of the coronavirus crisis, the finance ministers of the EU member states will discuss on 7 April 2020 a set of potential financial measures. The current most feasible options in the next package of measures would include:
- The activation of the European Stability Mechanism;
- The adoption of the European Commission’s new instrument to mitigate unemployment risks – SURE;
- Additional guarantees of the European Investment Bank.
In addition, France has proposed an additional common EU fund for economic recovery that would be limited in terms of its duration to five or 10 years, while the Netherlands put forward the idea of a €20 billion fund that would provide direct subsidies to cover health-related costs.
Commission waives customs duties and VAT on the import of medical equipment from non-EU countries
The European Commission presented today a decision temporarily waiving customs duties and VAT on the import of medical devices and protective equipment from third countries during the coronavirus crisis. The measure, applying to masks and protective equipment, as well as testing kits, ventilators and other medical equipment, will financially support the delivery of needed medical equipment. The Commission’s decision takes effect retroactively from 30 January 2020 and will for the time being apply for a period of 6 months.
Commission presents EU Emergency Support Instrument for the healthcare sector
The European Commission proposed an Emergency Support Instrument to directly support the Member States’ healthcare systems during the coronavirus. To finance the initiative, the Commission plans to mobilize €3 billion from the EU budget, of which €2.7 billion will be used for the Emergency Support Instrument and €300 million for the rescEU programme for medical equipment. The Commission’s legislative proposal to finance and implement this support instrument will enter into force as soon as the European Parliament and the Council have approved it.
European Investment Bank approves €700 million of financing for agriculture and bioeconomy
The European Investment Bank has approved a new programme loan with an amount of €700 million for the agriculture and bioeconomy sector. The programme aims to support private companies operating throughout the value chains of production and processing of food, bio-based materials and bioenergy. The lending programme will enable direct lending for private sector investments ranging from €15 million to €200 million, with the EIB loan amount ranging from €7.5 million to €50 million.
Update 2 April 2020
Commission continues climate work to deliver European Green Deal
Frans Timmermans, Commission’s Executive Vice-President for the European Green Deal, underlined in a press statement that during the times of the coronavirus crisis the Commission will continue to work intensively on key elements of the global climate agenda and on delivering the European Green Deal, including sustainable finance. According to Timmermans, the Commission’s legislative work on the proposed EU climate law as well as an impact assessment plan to raise the EU’s 2030 climate ambition and further reduce greenhouse gas emissions is on track.
Commission presents EU unemployment reinsurance scheme
The Commission presented its plans for a European instrument for a temporary support to mitigate unemployment risks in an emergency (SURE) following the COVID-19 outbreak. According to the proposal, the SURE will provide financial assistance up to €100 billion in the form of loans granted on favourable terms from the EU to affected Member States. To finance the loans to Member States, the Commission will borrow on financial markets. This proposed system allows the EU to assist Member States in:
- Addressing sudden increases in public expenditure to preserve employment;
- Covering the costs directly related to the creation or extension of national short-time work schemes (“Kurzarbeit”), and other similar measures they have put in place.
The Commission proposal needs to be adopted by the Council of the EU before entering into force.
Commission proposes Coronavirus Response Investment Initiative Plus
Today, the Commission presented its Coronavirus Response Investment Initiative Plus. While the first package of measures presented on 16 March 2020 concentrated on the immediate mobilisation of structural funds, today’s package introduces extraordinary flexibility to allow that all non-utilised support from the European Structural and Investment Funds can be mobilised to the fullest. Therefore, flexibility is provided for through:
- Transfer possibilities across the three cohesion policy funds (European Regional Development Fund, European Social Fund and Cohesion Fund);
- Transfers between the different categories of regions;
- Flexibility when it comes to thematic concentration.
The Commission also proposed a 100% EU co-financing rate for cohesion policy programmes for the accounting year 2020-2021, allowing Member States to benefit from full EU financing for crisis-related measures.
Update 1 April 2020
Possible next steps to fight coronavirus crisis discussed by the presidents of the European institutions
European Council President Charles Michel and the Presidents of the European Commission, the ECB and the Eurogroup discussed the socio-economic consequences of the COVID-19 crisis and possible next steps during a video conference chaired by Michel. According to them, a coordinated exit strategy, a comprehensive recovery plan, unprecedented investment and an adaptation of the EU budget are required to reactivate the European economy after the crisis.
During the meeting of the European Council on 26 March 2020, the EU leaders tasked the Eurogroup to present proposals to counter the current crisis within two weeks. The next meeting of the Eurogroup will take place on Tuesday, 5 April 2020.
France proposed EU coronavirus rescue fund to tackle the COVID-19 crisis
In order to support the EU member states during the COVID-19 crisis, France put forward the idea of a common EU fund for economic recovery that would be limited in terms of its duration to five or 10 years.
According to the French Finance Minister Le Maire, the fund would represent an additional toll to other financial packages, which are currently being negotiated by the eurozone institutions. The proposal could also represent a common compromise between the member states, moving the debate away from the so-called “coronabonds”, which were rejected by some governments.
Council adopts Commission‘s coronavirus measures
After European Parliament’s approval last week, the Council likewise adopted two “COVID-19” legislative acts proposed by the Commission on 13 March to release funding from the EU budget for tackling the current crisis. The approved proposals are:
- Coronavirus Response Investment Initiative (€37 billion from available EU funds to countries hit the hardest by the Coronavirus pandemic);
- The extension of the EU Solidarity Fund to cover public health emergencies (€800 million available for European countries in 2020).
Given the urgency of the situation, both legislative acts were published on 31 March and will enter into force on 1 April 2020.
Commission has allocated €48.5 million to research projects to fight the coronavirus
In the wake of the COVID-19 crisis, the European Commission has allocated €48.5 million to 18 research projects within Horizon 2020, the EU’s framework programme for funding research. The funded projects will focus on:
- improving preparedness and response to outbreaks by developing better monitoring systems to prevent the spread of the virus;
- rapid point-of-care diagnostic tests, enabling quicker and more accurate diagnosis;
- new treatments;
- developing new vaccines.
Update 30 March 2020
Commission will change its proposal for the Multiannual Financial Framework
To ensure recovery from the COVID-19 outbreak, the Commission will change its proposal for the Multiannual financial framework 2021-2027. The latter will include a stimulus package that will ensure that cohesion within the Union is maintained through solidarity and responsibility. In addition, the Commission is currently working on proposals for the recovery phase within the existing treaties, including a full flexibilisation of existing funds that could provide immediate support.
Commission wishes to extend the State aid Temporary Framework in cooperation with the Member States
The European Commission sent to Member States for consultation a draft proposal to extend the State aid Temporary Framework adopted on 19 March 2020. It proposes to extend the Temporary Framework by adding additional support possibilities for five types of aid measures:
- Support for coronavirus related research and development (R&D);
- Support for the construction and upgrading of testing facilities for products relevant to tackle the coronavirus outbreak (vaccines, protective material, etc.);
- Support for the production of products relevant to tackle to coronavirus outbreak;
- Targeted support in the form of deferral of tax payments and/or suspensions of employers’ social security contributions;
- Targeted support in the form of wage subsidies for employees.
Member States now have the possibility to comment on the Commission’s draft proposal. The Commission wishes to amend the current Temporary Framework this week.
Commission increases budget for repatriation flights and rescEU stockpile
The European Commission has proposed to offer €75 million from the EU budget to help Member States repatriate EU nationals and to increase the budget of the rescEU medical stockpile. Thanks to repatriation flights organised through the Union Civil Protection Mechanism and co-financed by the EU, 2 312 people have been already repatriated to Europe. On the other hand, the Commission’s decision to provide more funds to rescEU will increase the total budget of the first ever rescEU stockpile of medical equipment (ventilators, protective masks and essential medical gear) to €80 million.
Update 27 March 2020
European Council without final agreement on coronavirus response
The leaders of the EU member states held a video conference to discuss a coordinated response to the coronavirus outbreak on 26 March 2020. The conclusions are:
- No final agreement: The European Council invited the Eurogroup to present proposals within two weeks to counter the economic shock. To that end, the euro zone’s finance ministers will meet next week in order to advance their work on the proposal (including the use European Stability Mechanism and possibly other instruments, such as “coronabonds”).
- Exit and recovery strategy: The European Council asked the Commission to develop a science-based exit and recovery strategy from the COVID-19 crisis.
- MFF: According to the Commission’s President, the agreeing on the EU’s next long-term budget is one way to show solidarity over the crisis. Multiannual Financial Framework might thus be adjusted to the new post-crisis reality.
Parliament approves Commission’s coronavirus measures
As part of the EU’s joint response to the COVID-19 outbreak, MEPs almost unanimously adopted three urgent proposals in an extraordinary plenary session yesterday. The approved proposals are:
- Coronavirus Response Investment Initiative (€37 billion from available EU funds to countries hit the hardest by the Coronavirus pandemic);
- The extension of the EU Solidarity Fund to cover public health emergencies (€800 million available for European countries in 2020);
- Proposal to temporarily suspend EU rules on airport slots to prevent the so-called “ghost flights”.
After the Council formally approves Parliament’s position, the adopted measures will enter into force in the coming days.
Update 26 March 2020
EU-wide approach to foreign investment screening
The European Commission issued guidelines to ensure a strong EU-wide approach to foreign investment screening in a time of public health crisis and related economic vulnerability.
- It calls upon Member States to make full use of tools available to them under EU and national law to prevent capital flows from non-EU countries that could undermine Europe’s security or public order.
- The aim is to preserve EU companies and critical assets, notably in areas such as health, medical research, biotechnology and infrastructures that are essential for our security and public order, without undermining the EU’s general openness to foreign investment.
Measures to guarantee food security and an effective food supply chain
The Commission stated that strong support to the agri-food sector in the COVID-19 crisis is essential to ensuring food security and an effective food supply chain. To that end, the following measures were adopted:
- Extension of the deadline for Common Agricultural Policy payment applications: The new deadline for applications will now be 15 June 2020, instead of 15 May, allowing more flexibility for farmers to fill in their applications in these difficult times.
- Increased state aid: Under the Temporary Framework for state aid, farmers can now benefit from a maximum aid of €100,000 per farm, and food processing and marketing companies can benefit from a maximum of €800,000.
- Continuous flow of food products across the EU: The Commission and the Member States are working closely together to ensure a functioning single market for goods.
Update 25 March 2020
Eurogroup supports the activation of the European Stability Mechanism
According to the president of the Eurogroup, Mário Centeno, there is broad support for the “activation” of the European Stability Mechanism (ESM), which would provide credit lines of up to 2 percent of GDP to eurozone member states. Centeno will recommend EU leaders to endorse the use of the ESM on Thursday (26 March). The so-called “corona bonds” do not appear to be an option at the moment.
Commission approves new German State aid schemes
The Commission has approved new State aid schemes under the Temporary Framework:
- A German aid scheme providing guarantees for loans to affected companies. This will allow guarantees to be given for loans on favourable terms to help businesses cover immediate working capital and investment needs.
- The German “Bundesregelung Kleinbeihilfen 2020”, which is granted in the form of direct grants, repayable advances or tax and payment advantages.
Update 24 March 2020
EU institutions procure life-saving medical equipment
Within the context of rescEU, which is part of the EU Civil Protection Mechanism, the European Union purchases medical equipment for hospitals amounting to €50 million in order to support EU members states’ efforts to combat the virus. The European Parliament is working together with member states to swiftly approve €40 out of €50 million for intensive care medical equipment, which includes ventilators and personal protective equipment, such as reusable masks.
Update 23 March 2020
EU institutions activated the “escape clause” of the Stability and Growth Pact
The EU institutions have activated the general “escape clause” of the Stability and Growth Pact (SGP) as a part of their strategy to rapidly react to the coronavirus pandemic. This allows Member States to take budgetary measures in exceptional circumstances that would normally not be allowed under the European Fiscal Framework.
Commission approves German State aid scheme
The Commission has approved two German State aid schemes (implemented through the Kreditanstalt für Wiederaufbau – KfW):
- A credit scheme covering up to 90% of the risk for loans to businesses of all sizes. Loans can have a maturity of up to 5 years and can amount to up to €1 billion per company.
- A credit programme in which the KfW participates together with private banks to grant larger loans. Under this scheme, the risk assumed by the state can cover up to 80% of a given loan, but not more than 50% of the company’s total debt.
Update 22 March 2020
Functioning of the EU institutions in times of the COVID-19-crisis
Commission: All Commission officials who do not hold a so-called “critical function” have been working in home office since 2 March 2020. Staff with “critical” function is still present in the institution and works in two shifts. All the work in the current phase is focused on the central functions of the Commission – legislative work (combating corona effects) and ensuring compliance with the Treaties among the EU-27.
Parliament: Parliament staff has largely switched to remote working and all planned events in the Parliament were cancelled from the beginning of March. However, the institution remains open and will hold a plenary session in Brussels on Thursday, 26 March 2020 (voting by e-mail possible). Nevertheless, Parliament suspended all normal plenary sessions until September in Strasbourg and will only hold mini-plenary sessions in the next months in Brussels. Legislative work is now carried out at a higher level than usual by the committee chairmen and political group coordinators.
Council: The Council has now sent 90-95% of its staff to “telework” and only the so-called “critical staff” is on site. Meetings with physical presence have been reduced to the minimum. Meetings that have to take place due to political necessity are therefore mostly conducted digitally. In order to ensure the continuity of its work under these conditions, the Council has taken measures to facilitate decision-making by written procedure.
Update 20 March 2020
Call for research proposals within the Innovative Medicines Initiative
The Innovative Medicines Initiative (IMI), a public-private partnership between the European Commission and the pharmaceutical industry, has launched an accelerated call for research proposals for the development of treatments and diagnostics in the COVID 19 crisis. Up to €45 million of the funding will come from Horizon 2020, the EU research and innovation programme.
Update 19 March 2020
Adoption of a Temporary Framework for State Aid
The European Commission has adopted a “Temporary Framework” to give Member States the full flexibility provided for in the EU rules on state aid. It enables Member States to ensure that sufficient liquidity remains available to businesses of all types and to preserve the continuity of economic activity during and after the COVID-19 outbreak. The Temporary Framework provides for five types of aid:
- Direct grants, selective tax advantages and advance payments;
- State guarantees for loans taken by companies from banks;
- Subsidised public loans to companies;
- Safeguards for banks that channel State aid to the real economy;
- Short-term export credit insurance.
This scheme is justified under the current circumstances and will not be applied after 31 December 2020.
Update 18 March 2020
Adoption of the Pandemic Emergency Purchase Programme by the ECB
The European Central Bank has adopted a crisis programme called the Pandemic Emergency Purchase Programme (PEPP), under which private and public sector securities worth €750 billion will be purchased by the end of the year to counter the risks to the stability of the Eurozone.
Update 16 March 2020
Proposal for the Coronavirus Response Investment Initiative
The European Commission has proposed the so-called Coronavirus Response Investment Initiative, which will provide EU member states with €37 billion from the Cohesion Fund that have not yet been allocated to counter the economic consequences of the COVID-19 outbreak.
European Investment Bank mobilizes €40 billion for Corona-crisis
The European Investment Bank has proposed a plan to mobilize up to €40 billion of financing for European companies under strain from the coronavirus crisis and its economic effects. The financing package consists of:
- Guarantee schemes to banks based on existing programmes for immediate deployment (€20 billion);
- Liquidity lines to banks to ensure working capital support for SMEs and mid-caps (€10 billion);
- Asset-backed securities (ABS) purchasing programmes to allow banks to transfer risk on portfolios of SME loans (€10 billion).
Adoption of emergency packages by EU Member States
France, Spain and the United Kingdom have presented emergency packages comprising direct payments to workers and loans to businesses to mitigate the economic impact of the COVID-19 crisis. A potential nationalisation of companies is also not excluded.