The EU coordinates measures on COVID-19
To limit the spread of the Corona virus, non-essential travel to the EU will be banned for a period of 30 days. In addition to closing the EU’s external borders to people from non-EU countries, the EU Heads of State and Government have also agreed with the EU Commission and the ECB on a joint fight against the economic consequences of the epidemic. “We will do whatever it takes” declared EU Council President Michel. That includes supporting the various initiatives of the EU Commission which in recent days has announced that rules on state aid will be adjusted as will those on the use of flexibilities provided for in the Stability and Growth Pact.
On 13 March, the EU Commission already announced “flexibility in the legal framework for state aid” since the main fiscal response to the Corona virus will be financed from the national budgets of the Member States. EU aid rules enable Member States to take rapid and effective measures to support citizens and companies, especially SMEs, that are facing economic difficulties due to the Corona outbreak.
Existing EU rules allow Member States to devise extensive support measures. They can decide to grant wage subsidies or suspend the payment of corporation and sales tax or social contributions. In addition, they can grant financial support directly to consumers, e.g. for cancelled services or tickets that are not refunded by the relevant operators. EU aid provisions also enable Member States to support companies that are having to cope with liquidity shortages and in urgent need of rescue aid. Under Article 107 (2) (b) TFEU, Member States can grant compensation to companies to make good the damage caused by exceptional occurrences and, on this basis, also take measures in the aviation and tourism sectors.
According to the Commission, the impact of the COVID-19 outbreak in Italy is serious enough to justify the use of Article 107 (3) (b) TFEU. This allows the Commission to approve additional national support measures to remedy a serious disturbance in the economy of a Member State.
The Commission further announced that it will follow a similar approach in assessing the use of Article 107 (3) (b) TFEU in other Member States. For this it is drafting a special legal framework based on Article 107 (3) (b) TFEU which will be approved if necessary.
The Commission also proposed to the Council to make full use of the flexibility foreseen in the EU’s fiscal policy framework so that Member States are able to take the necessary action to contain the Corona virus outbreak and cushion its negative socio-economic effects. In addition, the general escape clause will be activated to provide more comprehensive fiscal support. This clause makes it possible, in cooperation with the Council, to suspend the fiscal adjustment recommended by the Council in the event of a severe economic downturn in the eurozone or the Union as a whole.
As Commission President von der Leyen announced on 10 March, targeted legal measures will be taken to cushion the economic and ecological effects of the outbreak in order to release airlines temporarily from their obligation to use at least 80% of their airport slots within a specific period so that they can continue to use them in the next year (“use-it-or-lose-it”).
Mobilising the EU budget
In order to provide immediate relief for hard hit SMEs, the EU budget will use its existing instruments to support these companies with liquidity and thus complement the measures being taken at national level. In addition, € 1 billion will be provided from the EU budget in the coming weeks as a guarantee to the European Investment Fund in order to encourage banks to issue loans to SMEs and midcaps. This will provide about € 8 billion in financial support for at least 100,000 European SMEs and small midcap companies. Debtors that are particularly badly affected by the crisis will also be given credit holidays.
The European Globalisation Adjustment Fund will be mobilised to support dismissed workers and the self-employed under the conditions of the current and future Regulation. Up to € 179 million is available for this in 2020.
In addition, the Commission has suggested expanding the scope of the European Union’s Solidarity Fund to cover health emergencies so that the fund can be used, where required, for the Member States that are hardest hit. Up to € 800 million is available for this in 2020.