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  12 March 2020  
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Economic and Financial Affairs

ECFIN E-news 214

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Coronavirus crisis: “Commission will use all the tools at its disposal to make sure the European economy weathers the storm”
Press conference of Ursula von der Leyen on COVID-19 © European Union, 2020

On 10 March, EU leaders gave the Commission a mandate to further step up its response to the Coronavirus, or COVID-19 outbreak, on all fronts and coordinate Member State actions.

On the health front, the Commission has announced a series of measures including assembling a team of epidemiologists from different Member States, taking stock of protective equipment and respiratory devices, and mobilising €140 million in public and private funding for promising research on vaccines, diagnosis and treatment. On the economic front, the Commission is committed to taking action at the macro-economic level. Commissioner Paolo Gentiloni, who will be in charge of all macro-economic aspects in the newly launched Coronavirus Response Team, has called all EU Member States for a coordinated fiscal response. The Commission will use all the tools at its disposal to make sure the European economy weathers this storm, in close coordination with and between Member States and the ECB. The Commission will ensure that state aid can flow to companies that need it and will make full use of the flexibility which exists in the Stability and Growth Pact. President von der Leyen said that she will present concrete ideas before the Eurogroup next week Monday to clarify the rules of the game for Member States very quickly. She also intends to launch a “Corona Response Investment Initiative” directed at health care systems, SMEs, labour markets, and other vulnerable parts of EU economies. The investment will be sizable and reach €25 billion quickly. President von der Leyen will propose to the Council and Parliament this week to release €7.5 billion of investment liquidity and will set up a Task Force to work with Member States to ensure that the money starts flowing in the coming weeks.

See also Coronavirus crisis: “Commission will use all the tools at its disposal to make sure the European economy weathers the storm”
Paolo Gentiloni, European Commissioner for the Economy
Paolo Gentiloni, European Commissioner for the Economy

“This is a wake up call for the necessity of a coordinated fiscal policy at the euro-area level”

More News
Commission launches online platform for the consultation on the review of economic governance
Economic governance review banner © European Union, 2020

Following the presentation of the review of the effectiveness of the economic surveillance framework, the Commission has now launched the dedicated on-line platform on which interested parties can express their opinions on the matter.

The start of a new political cycle in the Union is an opportune and appropriate moment to assess the effectiveness of the current framework for economic and fiscal surveillance, especially the six-pack and two-pack reforms. The Commission is required to report on their application. The purpose of the Communication on the economic governance review is to start a public debate on these questions. This public debate should provide an opportunity for stakeholders to provide their views on the functioning of surveillance so far and on possible ways to enhance the effectiveness of the framework in delivering on its key objectives.

The on-line survey will be accessible until 30 June 2020 under the following link: Public debate on the review of the EU economic governance.

See also Economic governance review
Finance Ministers welcome measures taken by Commission and Member States and affirm their readiness to safeguard the economy
EUROGROUP, Conference call on the coronavirus economic impact © European Union, 2020

The Eurogroup held a conference call on 4 March together with non-euro area members on the situation regarding the coronavirus disease (COVID-19).

The Eurogroup, liaising with the Commission, the ECB and the Croatian Council Presidency, is closely monitoring economic developments and financial impacts of the spread of COVID-19. Ministers welcomed the measures already taken by Member States to ensure that health systems and civil protection systems are adequately provided for to contain the disease and to help firms and workers that are particularly affected. They also welcomed the steps by the Commission to coordinate with Member States to share information, assess needs and ensure a coherent EU-wide response. Given the potentially significant impact of COVID-19 on growth, including through the disruption of supply chains, ministers underlined their commitment to coordinate responses and use all appropriate policy tools to achieve strong, sustainable growth as well as to safeguard against the further materialisation of downside risks. They affirmed that they are ready to take further coordinated policy action, including fiscal measures, when appropriate, to support growth. The SGP provides for flexibility to in response to unusual events outside the control of governments. At their next meetings, in mid-March, ministers will reassess the situation and any further steps needed, commensurate with the developments, as they unfold.

See also Statement on the situation with COVID-19
Commission proposes opening Excessive Deficit Procedure for Romania
The national flag of Romania next to the European flag © European Union, 2020

The Commission has proposed to the Council to open an Excessive Deficit Procedure for Romania and adopted a recommendation to the Council setting out the adjustment requirements.

The recommendation proposed on 4 March provides that Romania should pursue a credible and sustainable adjustment path with a view to putting an end to the excessive deficit by 2022, at the latest. The decisions follow the adoption of the Commission's Art. 126(3) Report, which found that Romania has failed to comply with the deficit criterion of the Treaty and that the opening of an Excessive Deficit Procedure is therefore warranted. The Economic and Financial Committee shared this assessment in its Opinion of 24 February 2020.The next step is for the Council to decide on the existence of an excessive deficit in Romania and to adopt its recommendation on the adjustment path and the deadline to end the excessive deficit situation. The full documents are available here.

See also Daily News 04 / 03 / 2020
Real Economy: Examining the role of fiscal rules in a new growth model for Europe
Screenshot of a video with P. Gentiloni © Euronews, 2020

The latest episode of Euronews’ Real Economy asks whether the time has come for a shakeup in European rules on taxation and spending.

With a rising need for investment to boost domestic demand, some European governments such as Germany, the Netherlands and Finland are under pressure to raise their spending as they are the only ones with the fiscal space to do so. There is now open debate in the EU on the reforms needed to the fiscal rulebook. According to Economy Commissioner Paolo Gentiloni, “…these rules were designed at a time of the most dangerous and severe post-war economic crisis in Europe…now we are at a different moment…[so] I think the rules should be adapted to this new framework, and to this new situation.” Mr. Gentiloni does not believe that the current fiscal targets should be changed but expresses a degree of frustration that the Commission cannot compel countries to invest. “The Commission has been recommending for several years that this fiscal space be used for investment,” he says. Becoming the first climate-neutral bloc in the world by 2050 will require significant investment, but Gentiloni does not think that Green investments should be excluded from deficit rules. Moreover, while more simplified rules are needed in order to address new challenges in the bloc such as climate change or the need to speed-up growth, to Commissioner Gentiloni the biggest challenge remains the same - making sure different Members States are on the same page over fiscal reform.

See also Fiscal Rules: Towards a new growth model for Europe
Investment Plan: EU backs SMEs, seed research and energy efficiency projects
© European Union, 2015

The European Investment Fund (EIF) has signed an agreement with Finint Investments SGR to join the investor pool of the PMI Italia II private debt fund.

The EIF investment of €30 million agreed on 3 March is backed by the European Fund for Strategic Investments (EFSI), the financial pillar of the Investment Plan for Europe, the Juncker Plan. It will support new development projects benefiting Italian SMEs. On 28 February, the European Investment Bank (EIB) granted Limagrain a loan of €170 million to support the seed group's research and development strategy on seed, the first link in the food chain. Limagrain is an agricultural cooperative owned by French farmers and the fourth largest seed company in the world. Altum and the EIB have joined forces for energy efficiency investments in Latvia. On 27 February, the EIB signed a €18 million loan agreement with the Latvian National Promotional Institution Altum to finance energy efficiency projects by Latvian companies. The financing is complemented by a €3 million guarantee under the “Private Finance for Energy Efficiency (PF4EE)” instrument, provided by the European Union under the LIFE programme.

See also Investment Plan for Europe: the Juncker Plan
Committing to climate-neutrality by 2050: Commission proposes European Climate Law and consults on the European Climate Pact
Press conference by Frans Timmermans, Executive Vice-President of the European Commission © European Union, 2020

The Commission has presented a proposal to enshrine in legislation the EU's political commitment to be climate neutral by 2050, to protect people and planet.

The European Climate Law sets the 2050 target and direction for all EU policy, and provides predictability for public authorities, businesses and citizens. At the same time, the Commission is launching a public consultation on the future European Climate Pact. Through this consultation, the public will be involved in co-designing this instrument. With the European Climate Law, the Commission proposes a legally binding target of net zero greenhouse gas emissions by 2050. The EU Institutions and the Member States are collectively bound to take the necessary measures at the EU and national level to meet the target. The Climate Law includes measures to keep track of progress and adjust actions accordingly, based on existing systems such as the governance process for Member States' National Energy and Climate Plans, regular reports by the European Environment Agency, and the latest scientific evidence on climate change and its impacts. Progress will be reviewed every five years, in line with the global stocktaking exercise under the Paris Agreement. The Climate Law also addresses the pathway to get to the 2050 target.

See also Committing to climate-neutrality by 2050: Commission proposes European Climate Law and consults on the European Climate Pact
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