The world today has grappled with the economic fallout of the coronavirus outbreak as the virus spread over 150 countries. In order to contain the economic fallout, the European Union is scrambling to find out tools to counterbalance the immense economic fallout of the disease, which could likely require a global effort. In this context, the EU has decided to create a 25 billion euro investment initiative directed at the most vulnerable parts of the economies.
In a statement, Von der Leyen, President of the European Commission stated “First and foremost, we must act at the macro-economic level.” She noted that we will use all the tools at our disposal to make sure the European economy weathers this storm. Furthermore, this requires coordination between the Member States, the Commission and the ECB, and expressed her comfort that leaders have called for such a coordinated strategy.
The commission is working on significant measures to support member states in their efforts, she said. Those are, including the Commission will make sure that state aid can flow to companies that need it; and the Commission will make full use of the flexibility which exists in the Stability and Growth Pact.
Von der Leyen further said that the Commission is working flat out on both fronts. She stresses the European Commission will, in a daily phone conference with the Health Ministers and the Ministers of Internal Affairs, coordinate the necessary measures; Secondly, the Commission will assemble a team of epidemiologists and virologists from different Member States to give us guidelines on the European level.
Italy’s New EU Bonds to Tackle Covid-19 Fallout
Last week, Economy Minister of Italy Roberto Gualtieri stated that European Union bonds were needed to fight the coronavirus emergency hobbling the bloc’s economies. “We should foresee the issue of European securities that can be used by each country under the same conditions and must be related to the fight against coronavirus and its economic consequences,” he said.
Italy, which has hardest hit by Covid-19 and has lost more lives of its citizens, has called for special coronavirus bonds or a European guarantee fund to assist EU states finance health spending and economic rescue initiatives.
Furthermore, to quickly direct 25 billion euro of European public investment to address the fallout of the Coronavirus crisis, the Commission will reportedly propose to relinquish this year its obligation to request refunding of unspent pre-financing for European structural and investment funds which is currently held by Member States.
Also, the Member States will be required to leverage these amounts to expedite their investments under the structural funds. They will utilize this for the national co-financing they would normally have had to deliver themselves to gain the next tranches of their structural fund envelopes. Considering reports the average co-financing rates across the Member States, the EUR 7.5 billion can trigger the release and use of some EUR 17.5 – EUR 18 billion of structural funding across the EU. This proposal can be executed through the adaptation of the common provision regulation for the structural funds.