Our first priority is the health of our citizens. At the same time, the coronavirus outbreak is a major shock for the European and global economies. Member States have already adopted or are adopting 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..
To cushion the blow to people’s livelihoods and the economy, the European Commission has adopted a comprehensive economic response to the outbreak, applied the full flexibility of the EU fiscal rules, has revised its State Aid rules and set up a €37 billion Coronavirus Response Investment Initiative to provide liquidity to small businesses and the health care sector.
In addition, on 2 April, the Commission proposed far-ranging measures to mobilise every euro of the EU budget to protect lives and livelihoods. The Commission launched a new initiative called SURE - Support mitigating Unemployment Risks in Emergency, helping to preserve jobs and support families. It also proposed to redirect all available structural funds to the response to the coronavirus. Farmers and fishermen will also receive support, as will the most deprived of aid. An EU Solidarity for Health Initiative worth €3billion will cater for the needs of Member States’ health systems.
Supporting recovery of EU tourism
The tourism ecosystem has been hit hard by the heavy restrictions on movement and travel imposed in the wake of Coronavirus outbreak. To get it back on track, on 13 May, 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.
Saving jobs with up to €100 billion in financial relief from the SURE programme
The SURE programme helps Member States cover the costs of national short-time work schemes and similar measures allow companies to safeguard jobs. The Commission also supports partnerships between employment services, social partners and companies to facilitate reskilling, especially for seasonal workers.
Connecting citizens to local offer, promoting tourism and Europe as a safe tourist destination
Among others, the Commission will continue to work with Member States to promote sustainable tourism in line with the European Green Deal and encourage digital transformation of tourism services. It will also promote pan-European communication campaigns featuring Europe as a tourist destination, and organise a European tourism convention about the future of sustainable, innovative and resilient European tourism ecosystem.
Securing businesses and supporting jobs
The coronavirus outbreak 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 above all we need to protect jobs and workers.
SURE - a new instrument to mitigate unemployment risks
On 2 April the European Commission launched a new initiative designed to protect jobs and workers affected by the coronavirus outbreak - the temporary Support mitigating Unemployment Risks in Emergency (SURE) initiative. The SURE initiative will provide financial assistance of up to €100 billion in total to Member States in the form of loans granted on favourable terms. These loans will help Member States to cover the costs of national short-time work schemes - public programmes that allow firms to reduce the working hours while providing income support. The short-time work schemes help sustain families’ incomes and preserve the productive capacity and human capital of enterprises and the overall economy.
Protecting small and medium-sized businesses
On 6 April, the Commission announced that financing estimated to €8 billion will be made available in April to provide immediate financial relief to small and medium-sized businesses across the EU. The Commission has unlocked €1 billion from the European Fund for Strategic Investments to serve as guarantee to the European Investment Fund in incentivising local banks and other lenders to provide liquidity to at least 100,000 European small and medium enterprises.
The survival of small and medium-sized enterprises economically hard hit by the coronavirus is essential for national economies across the EU. Supporting them is part of a comprehensive package put together by the Commission and the European Investment Bank Group.
The economic impact of coronavirus varies across industries and firms depending upon a number of factors, including the exposure to China as source of intermediate inputs, the possibility to shift to alternative suppliers, 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. The Commission acts where it can to support different industry sectors, notably those vital for the production, supply of food and tourism.
EU funding is available for all types of companies - small and medium enterprises and larger businesses. A wide range of financing is available: business loans, microfinance, guarantees and venture capital. Every year the EU supports more than 200,000 businesses. The Commission can help locate financial institutions that provide ﬁnancial support.
Banking package to support households and businesses
On 28 April, the European Commission adopted a banking package to help facilitate bank lending to households and businesses throughout the EU. This package ensures that banks can continue to lend money, thereby supporting the economy and significantly mitigating the effects felt by citizens and businesses. In applying the full flexibility of the EU’s banking rules and proposing targeted legislative changes, the Commission enables banks to keep on providing liquidity to those in need. The Commission engages with the European financial sector and explores how it can develop best practices and further support citizens and businesses. The banking package includes an Interpretative Communication on the EU’s accounting and prudential frameworks, as well as targeted “quick fix” amendments to EU banking rules
The European Semester
On 20 May, the European Commission proposed country-specific recommendations for all EU Members States and the United Kingdom. These recommendations provide economic policy guidance – including in the context of the coronavirus pandemic – focusing on the most urgent challenges created by the pandemic and on relaunching sustainable growth.
Countries receive recommendations from the Commission for two different timeframes: short-term to mitigate the coronavirus pandemic's severe negative socio-economic consequences; and in the short to medium-term to achieve sustainable and inclusive growth, which facilitates the green transition and the digital transformation. Promoting competitive sustainability to build an economy that works for people and the planet remains of utmost importance with the outbreak of the coronavirus crisis.
The recommendations cover areas such as investments in public health and resilience of the health sector, preserving employment through income support for affected workers, investments in people and skills, supporting the corporate sector - in particular small and medium-sized enterprises, and taking action against aggressive tax planning and money laundering. A coordinated European economic response is crucial to relaunch economic activity, mitigate damage to the economic and social fabric, and to reduce divergences and imbalances. The European Semester of economic and employment policy coordination therefore constitutes a crucial element of the recovery strategy.
Commission Spring 2020 Economic Forecast
On 6 May the European Commission published its Spring 2020 Economic Forecast. It sets out the effects of the coronavirus pandemic on the global and European Union economies, and presents the expected outcomes and projections for the first part of the year.
Despite the swift and decisive EU and national responses, the EU economy will experience a recession this year as the coronavirus pandemic came as a major economic shock. The Spring 2020 Economic Forecast projects the EU economy to contract by 7½% in 2020 and grow by around 6% in 2021. Growth projections for the European Union economies and the Euro area have been revised to be lower by 9% compared to the Autumn 2019 Economic Forecast.
The shock to the European Union economy is symmetric, as the pandemic has affected all Member States, but the drop in output in 2020 (from -4¼% in Poland to -9¾% in Greece) and the strength of the rebound in 2021 are set to differ significantly. The economic recovery of each Member State will depend on the evolution of the pandemic at national levels as well as on the structure of the economy and the state capacity to respond with stabilising policies. Given the interdependence of the EU economies, the dynamics of the recovery in each Member State will also affect the strength of the recovery of other Member States. Unprecedented and sustained EU and national responses will be crucial to limiting the economic damage and facilitating a swift and robust recovery to set the economies on the path of sustainable and inclusive growth.
The European Commission publishes two comprehensive forecasts (spring and autumn) and two interim forecasts (winter and summer) each year. The interim forecasts cover annual and quarterly GDP and inflation for the current and following year for all Member States, as well as EU and euro area aggregates.
The European Commission's next economic forecast will be the Summer 2020 Interim Economic Forecast which is scheduled to be published in July 2020. This will cover only GDP growth and inflation. The next full forecast will be published in November 2020.
Securing essential food supplies
Fund for European Aid to the most Deprived
As Europe is taking measures to slow down the spread of the coronavirus, it is more important than ever to support those most in need. The Fund for European Aid to the Most Deprived (FEAD) provides assistance, including food, clothing and other essential items for personal use, e.g. shoes, soap and shampoo, to those most in deprived of help. It will make delivery of food aid and basic material assistance possible through electronic vouchers, thus lower risk of coronavirus infections. Material assistance needs to go hand in hand with social inclusion measures, such as guidance and support to help people out of poverty. Over €3.8 billion are earmarked for the FEAD for the 2014-2020 period.
Support for the agricultural sector
“The fight against the coronavirus affects all parts of the European economy. One of the sectors where we will tolerate no disruption whatsoever is that of food. We stand by our farmers in these challenging times,” said President von der Leyen.
Following the coronavirus outbreak, the EU's agricultural sector is proving resilient and continues to provide Europeans with high quality and safe food. To ensure the continued production of healthy and safe European foods, the Commission proposed a range of concrete measures to ensure that farmers and other beneficiaries can get the support that they need.
On 4 May the Commission adopted and published the latest package of exceptional measures, previously announced on 22 April, to further support the agricultural and food sectors most affected by the coronavirus crisis. These exceptional measures include private storage aid for the dairy and meat sectors, temporary authorisations for operators to self-organise market measures in hard-hit sectors, flexibility in the implementation of market support programmes, and temporary derogation from EU competition rules in the milk, flowers and potatoes sectors.
Additionally, the Commission has also proposed to allow Member States to use rural development funds to compensate farmers and small agri-food businesses with amounts of up to €5,000 per farmer and €50,000 per small business, respectively. This proposal, pending approval by the Parliament and the Council, aims to provide immediate relief to those most impacted by the crisis. This is an addition to the maximum amount that national authorities can use to support farmers without prior approval from the Commission in the agricultural sector, and the increased state aid ceiling previously adopted.
On 17 March, the European Commission extended the deadline to 15 June 2020 for applications for support through the Common Agricultural policy, allowing more flexibility for farmers. Other measures include more time to allow administrations to process the applications, increasing advances for direct payments and rural development payments, and offering additional flexibility for on-the-spot checks to minimise the need for physical contact and reduce administrative burden.
Under the newly adopted 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. In some cases, this can be complemented by an up to €25,000. This means that the total national support that can be granted per farm adds up to €120,000 (or €125,000) under the temporary framework.
The Commission encourages Member States to make the fullest possible use of funding still available under their rural development programmes, to finance actions relevant to mitigating the current crisis and recovering from it.
Support for the fishing industry
Fishing and aquaculture are among the sectors most immediately impacted by the crisis. The demand for seafood has seen a sudden decrease, as retailers, restaurants, canteens and other large-scale buyers are reducing or temporarily closing activities.
The Commission has taken urgent action to mitigate this situation, which puts at stake the livelihoods of thousands, not least in the EU’s coastal regions, and the stable supply of healthy seafood to EU citizens. The fishing and aquaculture sectors are eligible for support under the new Temporary Framework for State aid, the Coronavirus Response Investment Initiative and under the European Maritime and Fisheries Fund.
The Commission is proposing to introduce exceptional amendments and flexibility measures in the European Maritime and Fisheries Fund. These measures will support fisheries, aquaculture farmers and producer organisations during the temporary cessation of activities, as well as provide a more flexible reallocation of financial resources and a simplified procedure for amending operational programmes.
Protecting critical European assets and technology
“As in any crisis, when our industrial and corporate assets can be under stress, we need to protect our security and economic sovereignty,” Commission President Ursula von der Leyen said.
On 26 March, the Commission issued guidelines for Member States on foreign direct investment. The guidelines urge Member States to make full use of, in this time of crisis, their investment screening mechanisms to address cases where the acquisition of European companies by investors from outside the EU would create a risk to the EU’s security and public order.
The guidelines encourage Member States to screen direct investment from outside the EU in particular areas such as medical research, biotechnology and infrastructures as they are essential for the EU’s security and public order.
The EU adopted a Regulation on the screening of foreign direct investment in March 2019. Currently, national foreign direct investment screening mechanisms are in place in 14 Member States.
Temporarily lifting customs duties and VAT on imports
The Commission has decided to approve requests from all Member States and the UK to temporarily waive customs duties and VAT on the import of medical devices, and protective equipment, from third countries. This will make it easier financially to get the medical equipment that doctors, nurses and patients desperately need. The Commission also published specialised guidance to ease the work of Member State customs authorities, and other relevant stakeholders, when dealing with customs procedures, e.g. minimising formalities on the import of human organs and bone marrow destined for transplant in the EU or various payment facilities for handling customs debt or proving preferential origin of goods.
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.
“I said that we will do whatever is necessary to support Europeans and the European economy. We delivered,” said President Ursula von der Leyen.
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.
The Commission stands ready to take further action as the situation evolves.
State aid actions
To further mitigate economic shocks and save businesses, the European Commission has put the most flexible State Aid rules yet, allowing Member States to provide direct support for hard hit companies and small firms as they may risk closing down without support. The Temporary Framework for State Aid measures, adopted on 19 March provides for five types of aid:
- direct grants (or tax advantages) of up to €800,000 per company;
- subsidised State guarantees on bank loans;
- public and private loans with subsidised interest rates;
- banks’ existing lending capacities, and use them as a channel for support for businesses – in particular to small and medium enterprises - such aid is clearly direct aid to the banks' customers and not to the banks themselves;
- additional flexibility to enable short-term export credit insurance to be provided by the State where needed.
The aim of these measures is to ensure that businesses retain the means to keep operating, or to temporarily freezing activity without implicating long-term growth prospects.
The new Framework does not replace, but complements the many other possibilities already available to Member States in line with State aid rules. These are set out in the Communication on a Coordinated economic response to the coronavirus outbreak of 13 March 2020.
The Commission approves through urgent procedures state aids cases 7 days a week. Further information can be found on the Commission’s State aid webpages: State aid coronavirus.
On 3 April, the Commission extended the Temporary Framework adopted on 19 March 2020, to enable Member States to accelerate the research, testing and production of coronavirus relevant products, to protect jobs and to further support the economy in the context of the outbreak. The framework provides support for:
1. coronavirus related research and development
2. the construction and upscaling of testing facilities
3. the production of products relevant to tackle the coronavirus outbreak
4. targeted support in the form of deferral of tax payments and/or suspensions of social security contributions
5. targeted support in the form of wage subsidies for employees. On 8 May, the Commission adopted a second amendment to extend the scope of the State aid Temporary Framework. This amendment complements the types of measures already covered by the Temporary Framework and existing State aid rules, by setting out criteria based on which Member States can provide assistance to companies in need, whilst protecting the level playing field in the EU. The emergency measures, which Member States have had to take to manage the coronavirus outbreak, have affected the ability of many European companies to produce goods or supply services, resulting in losses that have decreased their capital amounts and reduced their ability to borrow on the markets. This second amendment therefore enables public interventions in the form of recapitalisation aid to those companies in need, to help reduce the risk to the EU economy as a whole. The amended Temporary Framework will be in place until the end of December 2020 and for recapitalisation issues only until the end of June 2021. The Commission will keep assessing the situation.
Supporting the public short-term export credit market
As enterprises are facing a severe lack of liquidity and their trading conditions are increasingly exposed to financial risks, private insurers are withdrawing from the short-term export-credit market. As a result, all economically justifiable risks for exports to all countries in the world, including all Member States can no longer be sufficiently covered. The European Commission therefore decided on 27 March to temporarily remove all countries from the list of “marketable risk" countries under the Short-term export-credit insurance Communication. This will make public short-term export credit insurance more widely available in light of the current crisis. The amendment further expands on the flexibility introduced by the Commission's State aid Temporary Framework with respect to the possibility by State insurers to provide insurance for short-term export-credit.
The European Commission also decided on 27 March to temporarily remove all countries from the list of “marketable risk" countries under the Short-term export-credit insurance Communication. This will make public short-term export credit insurance more widely available in light of the current crisis linked to the coronavirus outbreak. The amendment further expands on the flexibility introduced by the Commission's State aid Temporary Framework with respect to the possibility by State insurers to provide insurance for short-term export-credit.
Coronavirus Response Investment Initiative
The European Commission has set up the Coronavirus Response Investment Initiative to help Member States fund their coronavirus crisis response. It combines the mobilisation of immediate financial support from the structural funds to address the most pressing needs with the maximum possible flexibility in the use of the funds.
With the Coronavirus Response Investment Initiative, the European Commission is offering quick and easy-to-use help at times when Europeans need it the most.
1. Immediate support for most pressing needs
The money can be used to:
- buy medical equipment,
- pay doctors and health workers
- support the unemployed
- Keep people in jobs
- Keep SME’s in business
Under the Coronavirus Response Investment Initiative, the hardest-hit Member States can also rely on up to €800 million from the EU Solidarity Fund.
2. Maximum flexibility in using EU funds
On 2 April 2020, the European Commission took a decisive further step to provide Member States with exceptional additional flexibility to use the uncommitted funding, totalling €54 billion for 2020, as required to address the coronavirus pandemic.
- Make it possible for Member States to exceptionally request 100% EU co-financing for their cohesion policy programmes
- Make it easier to transfer resources between funds as well as between categories of regions
- Give full flexibility to redirect resources to the areas most impacted by the current crisis
- Simplify procedures linked to programme implementation and audit
The European Commission proposes further to increase flexibility in the rules governing the funds that support the most deprived (FEAD), fishermen and the seafood sector, and farmers.
The Emergency Support Instrument provides support to help Member States in their efforts to address the COVID-19 pandemic. It provides a broad EU tool-box to respond to needs which can be best addressed in a strategic, coordinated manner at European level. As a financing arm of the Joint European Roadmap towards lifting COVID-19 containment measures, the instrument helps mitigate the immediate consequences of the pandemic and anticipate the needs related to the exit and recovery.
The Emergency Support Instrument is based on the principle of solidarity and pools efforts and resources to quickly address shared strategic needs. It is an important European top-up for the existing national and other European measures to tackle the ongoing public health crisis.
Strategic funding to boost global preparedness
The European Commission provides strategic funding for initiatives and operations aimed at mitigating the economic effects of the coronavirus and to save lives across the world.
The Commission has mobilised more than €400 million to boost global preparedness, prevention and containment of the virus inside and outside Europe. With A part of this EU contribution, the EU will support the World Health Organization (WHO), in particular the global preparedness and response plan.
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.
The macro-economic outlook
The Commission is actively monitoring the economic situation in the Member States and beyond, and is coordinating national economic responses. The Commission’s Winter Economic Forecast, presented on 13 February 2020, already identified coronavirus as a risk to the European economy.