The EU’s response to COVID-19
EU leaders have agreed on the following four priority areas at EU as level:
- limiting the spread of the virus
- ensuring the provision of medical equipment
- promoting research for treatments and vaccines
- supporting jobs, businesses and the economy.
With respect to the fourth priority above, on 23 April 2020, EU leaders endorsed a €540 billion package of three safety nets for workers, businesses and member states. The package consists of:
- €100 billion - Support to mitigate unemployment risks in an emergency (SURE)
- €200 billion - Pan-European guarantee fund for loans to companies (European Investment Bank)
- €240 billion - Pandemic crisis support for member states (European Stability Mechanism)
The EU also took action to redirect EU funds to help member states:
- €37 billion from structural funds to support EU countries and their citizens in their fight against the outbreak
- up to €800 million through the EU Solidarity Fund, which has been amended to provide support to member states affected by public health crises like the one caused by COVID-19
- additional €3.1 billion unlocked from the 2020 budget to respond to the COVID-19 crisis
The EU has also increased flexibility in the use of structural funds, which allows member states to transfer money between different funds and regions to meet their needs in mitigating the social and economic damage of the pandemic. Member States can also request up to 100% financing from the EU budget for initiatives dealing with the impact of the COVID-19 outbreak.
The EU is applying the full flexibility of EU fiscal rules to help member states’ authorities to support healthcare systems and businesses and to maintain employment during the crisis.
EU state aid rules have also been relaxed so that governments can provide liquidity to the economy.
EU leaders also agreed to work towards establishing a recovery fund, based on an updated proposal for the next long-term EU budget (Multiannual Financial Framework - MFF).
- SURE initiative adopted: €100 billion to keep people in jobs and businesses running
On May 19, 2020, Member States agreed on the SURE initiative, which will become operational once all Member States have committed and signed their guarantee agreements with the Commission.
- SURE is a new instrument that will provide up to €100 billion in loans to countries that need it to ensure that workers receive an income and businesses keep their staff. This allows people to continue to pay their rent, bills and food shopping and helps provide much needed stability to the economy.
- The loans will be based on guarantees provided by Member States and will be directed to where they are most urgently needed. All Member States will be able to make use of this but it will be of particular importance to the hardest-hit.
- SURE will support short-time work schemes and similar measures to help Member States protect jobs, employees and self-employed against the risk of dismissal and loss of income. Firms will be able to temporarily reduce the hours of employees or suspend work altogether, with income support provided by the State for the hours not worked. The self-employed will receive income replacement for the current emergency.
COVID-19: Council adopts temporary support to mitigate unemployment risks in an emergency (SURE)
- European Investment Bank (EIB) Pan-European guarantee fund for loans to companies
On April 16 the EIB Board approved a €25 billion European guarantee fund with the goal to deliver up to €200 billion in support of the real economy, with a focus on small and medium-sized companies. The €25 billion guarantee fund will be funded by EU Member States pro rata to their shareholding in the EIB and/or other institutions.
Coronavirus outbreak: EIB Group’s response
- European Stability Mechanism: Pandemic crisis support for member states
- In the euro area, the European Stability Mechanism (ESM) is equipped with instruments that could be used, as needed, in a manner adapted to the nature of the symmetric shock caused by COVID 19.
- The Eurogroup proposed to establish a Pandemic Crisis Support, based on the existing ECCL precautionary credit line and adjusted in light of this specific challenge, as a relevant safeguard for euro area Member States affected by this external shock.
- The ESM Pandemic Crisis Support was endorsed by the European Council on 23 April.
- On 8 May, the Eurogroup agreed on the details of to this credit line, which was made operational by the ESM Board of Governors on 15 May 2020.
- The Pandemic Crisis Support is available to all euro area Member States for amounts of 2% of the respective Member’s GDP as of end-2019, to support domestic financing of direct and indirect healthcare, cure and prevention-related costs due to the COVID-19 crisis.
ESM pandemic crisis support
Eurogroup Statement on the Pandemic Crisis Support
Additional measures to support the agri-food sector
On April 23, 2020 the Commission announced additional exceptional measures to further support agricultural and food markets most affected, including:
- Granting private storage aid for dairy and meat products, which will lead to a decrease of available supply on the market and rebalance the market on the long-term;
- Introducing flexibility in the implementation of market support programs for wine, fruits and vegetables, olive oil, apicultures and the EU’s school scheme;
- Exceptional derogation from EU competition rules applicable to the milk, flowers and potatoes sectors, allowing them to collectively take measures to stabilize the market.
Council of the EU adopted measures for immediate release of funds
- The Council, on March 30, adopted two legislative acts to quickly release funding from the EU budget for tackling the COVID-19 crisis. One of the acts amends the rules of the structural and investment funds, while the other extends the scope of the EU Solidarity Fund.
- The Coronavirus Response Investment Initiative gives member states access to €37 billion of cohesion money to strengthen healthcare systems, as well as support small and medium-sized enterprises, short-term working schemes, and community-based services.
- Of the total, about €8 billion comes from unspent pre-financing in 2019 under the structural funds. The new measure allows member states to spend unused money to mitigate the impact of the pandemic instead of returning it to the EU budget. Another €29 billion is disbursed early from allocations which would have been due later this year.
- Member states also have greater flexibility to make transfers between cohesion policy programs in order to redirect resources to where they are most needed.
- The Council also amended the scope of the EU Solidarity Fund to include public health emergencies in addition to natural disasters.
COVID-19 - Council adopts measures for immediate release of funds