Our first priority is the health of our citizens. At the same time, the coronavirus crisis is a major shock for the European and global economies. Member States have already adopted budgetary, liquidity and policy measures to increase the capacity of their health systems and provide relief to those citizens and sectors that are particularly impacted.
Supporting businesses and securing jobs
The coronavirus crisis constitutes a challenge for the European economy and the livelihoods of citizens. During this health crisis, it is vital that we not only protect the critical sectors of our economy, but also our assets, technology and infrastructure, and more importantly, we need to protect jobs and workers.
Protecting small and medium-sized businesses
The economic impact of the coronavirus crisis varies across industries and firms depending upon a number of factors, including the possibility to adapt to disruptions in supply chains, and the existence of inventories or reliance on just-in-time production processes.
The European Commission is in close contact with national authorities, industry representatives and other stakeholders in order to monitor and evaluate the impact on European industries and trade.
Initiatives to support the economy
Supporting the recovery of EU tourism
The tourism ecosystem has been hit hard by restrictions on movement and travel imposed in the wake of coronavirus crisis. To get it back on track, on 13 May 2020, the Commission proposed a series of measures that would allow for a gradual and coordinated reopening of tourism services and facilities, as well as specific support for tourism businesses. They include:
Liquidity for tourism businesses, in particular small businesses
- Flexibility under State aid rules allows Member States to introduce schemes, such as guarantee schemes for vouchers and further liquidity schemes, to support companies and to ensure that reimbursement claims caused by the coronavirus pandemic are satisfied.
- EU funding: The EU continues to provide immediate liquidity to businesses affected by the crisis through the Coronavirus Response Investment Initiative, under shared management with Member States. In addition, the Commission has made available up to €8 billion in financing for 100,000 small businesses hit by the crisis, with the European Investment Fund.
Securing essential food supplies
Protecting critical European assets and technology
On 26 March 2020, the Commission issued guidelines for Member States on foreign direct investment. The guidelines urge Member States to make full use of their investment screening mechanisms to address cases where the acquisition of European companies by investors from outside the EU would create risks.
The guidelines encourage Member States to screen direct investment from outside the EU in particular areas such as medical research, biotechnology and infrastructures.
On 7 July 2021, the European Commission published its Summer 2021 Economic Forecast. The European economy is forecast to rebound slightly faster than previously expected, as activity in the first quarter of the year exceeded expectations and the improved health situation prompted a swifter easing of pandemic control restrictions in the second quarter.
According to the Summer 2021 interim Economic Forecast, the economy in the EU and the euro area is set to expand by 4.8% this year and 4.5% in 2022. Compared to the previous forecast in the spring, the growth rate for 2021 is significantly higher in the EU (+0.6 pps.) and the euro area (+0.5 pps.), while for 2022 it is slightly higher in both areas (+0.1 pp.). Real GDP is projected to return to its pre‑crisis level in the last quarter of 2021 in both the EU and the euro area. For the euro area, this is one quarter earlier than expected in the Spring Forecast.
The Recovery and Resilience Facility is expected to make a significant growth contribution. The total wealth generated by the Facility over the forecast horizon is expected to be approximately 1.2% of the EU’s 2019 real GDP.
Review of the EU economic governance
On 19 October 2021, the European Commission adopted a Communication that takes stock of the changed circumstances for economic governance in the aftermath of the coronavirus crisis and relaunches the public debate on the review of the EU’s economic governance framework.
With this Communication, the Commission invites all stakeholders to reflect on the functioning of the economic governance and to present their views on how to enhance its effectiveness. The aim of the public debate is to build a broad-based consensus on the way forward well in time for 2023. The Commission will consider all views expressed during this public debate.
Flexibility under the EU’s Fiscal Rules
The European Commission has, for the first time ever, activated the general escape clause of the Stability and Growth Pact as part of its strategy to quickly and forcefully respond to the coronavirus outbreak in a timely and coordinated manner. This enables national governments to better support the national economies as the budgetary rules have been significantly relaxed.
Following the approval of the Council, the general escape clause allows Member States to undertake measures to deal adequately with the crisis, while departing from the budgetary requirements that would normally apply under the European fiscal framework.
The measure represents an important step in fulfilling the Commission’s commitment to use all economic policy tools at its disposal to support Member States’ in protecting their citizens and mitigating the pandemic’s severely negative socio-economic consequences.
On 3 March 2021, the Commission adopted a Communication providing Member States with broad guidance on the conduct of fiscal policy in the period ahead. The Communication sets out guidance for coordinated fiscal policies in Member States, essential to support the economic recovery. It lays out principles for the proper design and quality of fiscal measures, as well as general fiscal policy indications in 2022 and over medium-term, including the link with funds of the Recovery and Resilience Facility. It also proposes the application of the general escape clause in 2022, until 2023.
Decisive actions by the European Central Bank and the European Investment Bank
On 18 March, the European Central Bank’s Governing Council announced a new Pandemic Emergency Purchase Programme with an envelope of €750 billion until the end of the year, in addition to the €120 billion decided on 12 March. Together this amounts to 7.3% of euro area GDP. The programme is temporary and designed to address the unprecedented situation our monetary union is facing. It will remain in place until the crisis phase is over.
On 16 March, the European Investment Bank Group proposed a plan to mobilise up to €40 billion in financing. This will go towards bridging loans, credit holidays and other measures designed to alleviate liquidity and working capital constraints for SMEs and mid-caps. The European Investment Bank Group, including the European Investment Fund, which specialises in support for small and medium-sized enterprises, will work through financial intermediaries in the Member States and in partnership with national promotional banks. The proposed financing package consists of:
- Dedicated guarantee schemes to banks based on existing programmes for immediate deployment, mobilising up to €20 billion of financing;
- Dedicated liquidity lines to banks to ensure additional working capital support for small and medium-sized enterprises and mid-caps of €10 billion;
- Dedicated asset-backed securities purchasing programmes to allow banks to transfer risk on portfolios of small and medium-sized enterprise loans, mobilising another €10 billion of support.