Unprecedented measures taken by the EU in the face of COVID-19
Updated: Apr 8
In light of the COVID-19 crisis that is holding Europe in a deadly grip, EU Member States have implemented unprecedented measures to combat the pandemic and mitigate the socio-economic impact within their respective countries.
On a Union level, the European Commission has taken different actions to alleviate the effects of the crisis and to boost the European economy, namely:
1. Flexibility of the European fiscal rules: so-called general escape clause under the Stability and Growth Pact allowing for more flexibility on government spending, and no policing of fiscal policies.
2. Support through the current State Aid framework, which allows for wage subsidies, suspension of payments of corporate and value-added taxes or social contributions, direct financial support to consumers for cancelled services and support for liquidity shortages .
3. The flexibility of State aid rules through the Temporary Framework.
4. The Commission’s proposal for the Coronavirus Response Investment Initiative was approved by the European Parliament and the Member States on 26 March. No amendments were proposed in order to facilitate a swift and efficient response to the crisis.
○ The initiative allocates €37 billion of cohesion policy funding, sourced from the 2014-2020 cohesion policy programmes, for countries to spend on health care or financing for small and medium-sized businesses, for example. Please find here the allocation for the Member States.
○ The Commission made a proposal to Council and Parliament to modify the common provision regulation for the structural funds.
○ Commenting on the approval by the European Parliament of the Coronavirus Response Investment Initiative, Culture and Education Committee Chair, Sabine Verheyen (EPP, DE) called on the Member States to make sure that this financial support reaches businesses and individuals in the cultural and creative sector as well. Please find here the press release.
Detailed information on the above actions are available here. These actions are not targeting any specific sector, but could be open to SMEs from the cultural and creative sectors.
Next steps on the EU response to the economic crisis
On 26 March 2020, Member State leaders released a joint statement on the key areas where a coordinated action is needed, namely:
1. Limiting the spread of the virus 2. Providing medical equipment 3. Promoting research 4. Tackling socio-economic consequences 5. Citizens stranded in third countries
On the economic measures taken, leaders expressed support for the initiative taken by the European Central Bank and for the Coronavirus Response Investment Initiative, committed to alleviating social and employment problems including with the use of EU instruments and thanks to the Temporary Framework proposed by the Commission.
Furthermore, the European Council tasked the Eurogroup to present proposals to fight the economic effects of the crisis within two weeks after they failed to find a consensus on the so-called coronabonds, which were strongly argued for by Italy, Spain, Portugal and France as a means to share financial risk.
A final call was directed to the European Commission to start working on a proposal for a Roadmap for economic recovery accompanied by an Action Plan. This exercise should be done in consultation with other institutions, especially the European Central Bank and will require a “coordinated exit strategy, a comprehensive recovery plan and unprecedented investment” for the coronavirus crisis.
On 28 March 2020, Commission President Von der Leyen confirmed in a statement that the Commission will work with the Eurogroup to decide on what fiscal instruments to deploy in the rest of the year 2020.
Multiannual Financial Framework (MFF) 2021-2027
In the meantime, the European Commission will work to recommend changes to the previously proposed MFF plan, including a new stimulus package, to help the bloc face and recover from the economic damage caused by COVID-19 pandemic.
Ahead of the COVID-19 outbreak, Member States were engaged in negotiations to reach an agreement on the budget for the European Union for the years 2021-2027. European Council President Charles Michel put forward his own proposed compromise blueprint earlier this year, but leaders were unable to come to an agreement when it was debated at a summit in February 2020. He will have a key role in facilitating Member States to break a deal with as little delay as possible.