Commission sets measures to ease COVID-19 outbreak impact

€37bn under cohesion policy will be directed to the fight against the current crisis

The Commission presented on Friday an immediate response to alleviate the socio-economic impact of the COVID-19 outbreak across the EU, centred on a European coordinated response. It will use all the tools at its disposal to mitigate the consequences of the pandemic.

The package includes ensuring the necessary supplies to the health systems by preserving the integrity of the Single Market and of production and distribution of value chains, and delivering support so that income and jobs of people are not affected disproportionally and to avoid permanent effect of this crisis.

The measures also aim to prop up firms and ensure that the liquidity of our financial sector can continue to support the economy, as well to allow Member States to act decisively in a coordinated way, through using the full flexibility of our State Aid and Stability and Growth Pact Frameworks.

Reiterating that the Coronavirus pandemic was an unprecedented challenge for our health care systems, but also ‘a major shock for our economies', EC President Ursula von der Leyen, stated that the single market has to function. Every Member State, all of us, have to know and to understand that it is not possible to stop the virus, but it is possible and of utmost importance to slow down the spread of the virus and that is doable, she underlined.

 “For any measures to be effective, they need to be coordinated at EU level. Member States, especially neighbouring ones, need to work very closely together. In this way – and it is the only way – we can make sure that our citizens receive the health care that they need immediately, wherever they are at the moment. We will do whatever is necessary to support the Europeans and the European economy,” von der Leyen said.

Under the new Coronavirus Response Investment Initiative, the Commission proposes to direct €37bn under cohesion policy to the fight against the Coronavirus crisis. To this effect, the Commission proposes to relinquish this year its obligation to request Member States to refund unspent pre-financing for the structural funds. This amounts to about €8bn from the EU budget, which Member States will be able to use to supplement €29bn of structural funding across the EU.

These measures will effectively increase the amount of investment in 2020 and help to front-load the use of the as yet unallocated €28bn of cohesion policy funding within the 2014-2020 cohesion policy programmes. The Commission calls upon the European Parliament and the Council to swiftly approve this proposal, so that it can be adopted within the next two weeks.

Furthermore, the Commission is proposing to extend the scope of the EU Solidarity Fund by also including a public health crisis within its scope, in view of mobilising it if needed for the hardest hit Member States. Up to €800m is available in 2020. 

The executive emphasised that the main fiscal response to the Coronavirus will come from Member States' national budgets. EU State aid rules enable Member States to take swift and effective action to support citizens and companies, in particular SMEs, facing economic difficulties due to the COVID-19 outbreak.

Member States can design ample support measures in line with existing EU rules. First, they can decide to take measures, such as wage subsidies, suspension of payments of corporate and value added taxes or social contributions. In addition, Member States can grant financial support directly to consumers, for example for cancelled services or tickets that are not reimbursed by the operators concerned.

Also, EU State aid rules enable Member States to help companies cope with liquidity shortages and needing urgent rescue aid. Article 107(2)(b) TFEU enables Member States to compensate companies for the damage directly caused by exceptional occurrences, including measures in sectors such as aviation and tourism.

Currently, the impact of the COVID-19 outbreak in Italy is of a nature and scale that allows the use of Article 107(3)(b) TFEU. This enables the Commission to approve additional national support measures to remedy a serious disturbance to the economy of a Member State.

The Commission's assessment for the use of Article 107(3)b for other Member States will take a similar approach.

To bring immediate relief to hard-hit SMEs, the EU budget will deploy its existing instruments to support these companies with liquidity, complementing measures taken at national level.

In the coming weeks, €1bn will be redirected from the EU budget as a guarantee to the European Investment Fund to incentivise banks to provide liquidity to SMEs and midcaps. This will help at least 100,000 European SMEs and small mid-caps with about €8bn of financing. Credit holidays to the existing debtors that are negatively affected will be provided as well.

For alleviating the impact on employment the Commission will furthermore accelerate the preparation of the legislative proposal for a European Unemployment Reinsurance Scheme aiming at supporting Member State policies that preserve jobs and skills.

The well-known European Globalisation Adjustment Fund could also be mobilised to support dismissed workers and those self-employed under the conditions of the current and future Regulation. Up to €179m is available in 2020.

More on this subject: Coronavirus

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