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  07 May 2020  
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Economic and Financial Affairs

ECFIN E-news 218

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Spring 2020 Economic Forecast: A deep and uneven recession, an uncertain recovery
Press conference of Paolo Gentiloni, on the Spring economic forecast © European Union, 2020

The coronavirus pandemic represents a major shock for the global and EU economies, with very severe socio-economic consequences.

Despite the swift and comprehensive policy response at both the EU and national levels, the EU economy will experience a recession of historic proportions this year. The Spring 2020 Economic Forecast released on 7 May projects that the euro area economy will contract by a record 7¾% in 2020 and grow by 6¼% in 2021. The EU economy is forecast to contract by 7½% in 2020 and grow by around 6% in 2021. Growth projections for the EU and euro area have been revised down by around nine percentage points compared to the Autumn 2019 Economic Forecast. The shock to the EU economy is symmetric in that the pandemic has hit all Member States, but both the decline in output in 2020 (from -4¼% in Poland to -9¾% in Greece) and the strength of the rebound in 2021 are set to differ markedly. Each Member State's economic recovery will depend not only on the evolution of the pandemic in that country, but also on the structure of their economies and their capacity to respond with stabilising policies. Given the interdependence of EU economies, the dynamics of the recovery in each Member State will also affect the strength of the recovery of other Member States. While short-time work schemes, wage subsidies and support for businesses should help to limit job losses, the coronavirus pandemic will have a severe impact on the labour market. The unemployment rate in the euro area is forecast to rise from 7.5% in 2019 to 9½% in 2020 before declining again to 8½% in 2021. In the EU, the unemployment rate is forecast to rise from 6.7% in 2019 to 9% in 2020 and then fall to around 8% in 2021.

See also Spring 2020 Economic Forecast: A deep and uneven recession, an uncertain recovery
Paolo Gentiloni, European Commissioner for the Economy © European Union, 2020
Paolo Gentiloni, European Commissioner for the Economy

“Europe is experiencing an economic shock without precedent since the Great Depression. Both the depth of the recession and the strength of recovery will be uneven, conditioned by the speed at which lockdowns can be lifted, the importance of services like tourism in each economy and by each country's financial resources. Such divergence poses a threat to the single market and the euro area - yet it can be mitigated through decisive, joint European action. We must rise to this challenge.”

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Coronavirus Global Response: €7.4 billion raised for universal access to vaccines
Press conference of Ursula von der Leyen on the EU’s response to the COVID-19 crisis © European Union, 2020

The Commission registered €7.4 billion, equivalent to $8 billion, in pledges from donors worldwide during the Coronavirus Global Response pledging event held on 4 May.

This includes a pledge of €1.4 billion by the Commission. The Commission commitment is based on €1 billion in grants and €400 million in guarantees on loans through reprioritisation of Horizon 2020 (€1 billion), RescEU (€80 million), the Emergency Support Instrument (€150 million) and external instruments (€170 million). The total amount pledged almost reaches the initial target of €7.5 billion and is a solid starting point for the worldwide pledging marathon, which began on 4 May. The aim is to gather significant funding to ensure the collaborative development and universal deployment of diagnostics, treatments and vaccines against the coronavirus. The pledging event was co-convened by the EU, Canada, France, Germany, Italy (also incoming G20 presidency), Japan, the Kingdom of Saudi Arabia (also holding the G20 presidency), Norway, Spain and the United Kingdom. The initiative is a response to the call from the World Health Organization (WHO) and a group of health actors for a global collaboration for the accelerated development, production and equitable global access to essential new coronavirus health technologies. The Coronavirus Global Response Initiative is comprised of three partnerships for testing, treatment and prevention underpinned by efforts to strengthen health systems.

See also Coronavirus Global Response: €7.4 billion raised for universal access to vaccines
Coronavirus Response: Commission adopts banking package to facilitate lending to households and businesses in the EU
Press conference of Valdis Dombrovskis on the EU’s response to the COVID-19 crisis © European Union, 2020

The Commission adopted a banking package on 28 April to help facilitate bank lending to households and businesses throughout the EU.

The aim of the package is to ensure that banks can continue to lend money to support the economy and help mitigate the significant economic impact of the Coronavirus. It includes an Interpretative Communication on the EU's accounting and prudential frameworks, as well as targeted “quick fix” amendments to EU banking rules. The rules put in place following the financial crisis have ensured that banks in the EU are now more resilient and better prepared to deal with shocks to the economy. The Communication issued with this banking package recalls that EU rules allow banks and their supervisors to act in a flexible, but responsible, manner during economic crises to support citizens and firms, particularly small and medium-sized companies. The Regulation also implements some targeted changes to maximise the capacity of credit institutions to lend and to absorb losses related to the Coronavirus pandemic, while ensuring their continued resilience.

See also Coronavirus Response: Commission adopts banking package to facilitate lending to households and businesses in the EU
Investment Plan: EIB signs collaboration with Israel Innovation Authority and €50 million financing agreement with Pluristem to develop therapies for COVID-19 and other unmet medical needs
© European Union, 2015

The European Investment Bank (EIB) signed a collaboration agreement on 30 April with the Israel Innovation Authority to jointly pursue investment opportunities in the domain of bio-convergence in health.

The EIB will also back Pluristem with €50 million in financing, which will help the company to advance the clinical development of its cell therapies and address a number of severe medical conditions, including COVID-19. The deal is the first Israeli-European project guaranteed by the European Fund for Strategic Investments, the financial pillar of the Investment Plan for Europe, a joint initiative of the EIB and the European Commission.

See also Investment Plan for Europe: the Juncker Plan

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