EU sailing into a recession, DE-PT-SI Trio of Council Presidencies to navigate the crisis, EU recovery action plan in the making.
- Sailing into a recession: The European Commission has published its Spring 2020 Economic Forecast, projecting a contraction of roughly 8% in the coming year. 2021 is set to see 6% growth. Although all Member States are affected by the economic crisis that is following the outbreak of COVID-19, the extent ranges from 4% in Poland to almost 10% in Greece. The pace of recovery, too, will differ “markedly”.
- Setting the course: The Commission’s agenda for the upcoming months has been published and includes several COVID-19 related items. Commissioners will debate mobility, especially on the resumption of passenger transport and protocols for tourism destinations. Commissioners Borrell and Jourova will also lead a file on disinformation in the context of the pandemic.
- At the helm: President Ursula von der Leyen hosted a global pledging conference to collect financial commitments from participating governments to fight the pandemic and develop a vaccine. The initiative was set to collect €7.5 billion in funding but stopped short at €7.4 billion. Over €4 billion had been contributed by European Union Member States. President von der Leyen called the conference a success, despite the absence of the United States.
Council (and other ministerial bodies)
- Navigating the crisis: The DE-PT-SI Council Presidency Trio Draft Programme has been circulated to Member States. The programme’s chief focus lays on mitigating the public health, economic, and social impact of the pandemic. The trio wants European society and economy to return to “normal functioning and to sustainable growth.” Key points are the green transition and digital transformation. The trio also looks ahead to more strategic autonomy (medical supply chains), screening of foreign direct investments (hostile takeovers), and more resilient infrastructure. Looking inwards, Germany, Portugal, and Slovenia will address the impact of the pandemic on the transport sector (i.e. airlines), tourism sector, and more broadly strengthen the EU’s approach to occupational health and safety. The trio also wants the EU to encourage a global response through multilateralism and rules-based international order.
- Wind for change: Energy ministers of eight Member States have demanded in a letter to Commissioners Breton and Simson that the Commission focus on renewable energy technologies to reach the sustainable growth targets of the Green Deal. The letter, chiefly authored by the Minister for Energy of Lithuania, foresees an investment of €2 trillion into wind and solar, and calls for renewable energy value chains to be retained in the European Union. Amongst a host of measures called for by the signatories is the demand to grant the renewable energy industry “dedicated access” to COVID-19 economic recovery instruments.
- Telco Ministers Teleworking: Ministers held an informal online summit on 5th May to discuss what the COVID-19 crisis means for the telecommunications and digital sector. Participants addressed tracing technology (apps and mobility data), and coordination at EU level.
(Former) Member States
- UK: The UK is considering testing sewage waters for COVID-19 to monitor the progress of the outbreak on the island. Previous studies have shown that the virus can be detected in waste sludge, which can help identifying hotspots. The plan, currently under development with the help of scientists, could also support an early warning system to detect a possible second wave of infections (source: POLITICO).
- France: A Paris position paper suggested a three-year recovery fund equipped with up to €300 billion annually to support struggling states in upping their economies in the wake of recessions resulting from the pandemic. The non-paper proposes that the Commission raise capital through bonds and then distribute grants to Member States in need. The paper explicitly rejects support in the form of loans, stressing solidarity.
- Greening state-aid: The Commission has announced it would not make state-aid approvals contingent on green requirements, triggering dismay from the European Parliament. Green MEP Pascal Canfin, Chair of the ENVI Committee, said the Commission could either opt for a “weak” approach by asking Member States to commit to green ambitions without clear rules on what this means, or a strong approach where aid is tied to “Green Transition Pacts” (source: POLITICO).
- State-aid: Since this newsletter was published last, the Commission approved a number of Member State state-aid applications under the temporary framework for state aid. Below is an overview, and here are all the details.
- France: €7 billion for Air France
- Italy: €30 million for SMEs in agriculture and fisheries
- Czech Republic: €5.2 billion export guarantees
- Belgium: €250 million subordinated loans for SMEs and start-ups
- Denmark: €296 million loans to start-ups
- Greece: €10 million for floriculture sector
- Finland: €40 million direct grants for agricultural and fisheries sector
Budget & Recovery
- Solvency Support: The next EU budget might include a European instrument to support strategic companies with equity capital. According to a draft of the next budget, the Commission was considering the creation of a “new Solvency Support Instrument”, possibly starting in 2020. The ballpark figure put on the proposal is €16 billion, with possible streams of up to €200 billion. The rationale behind this, according to Commissioner Gentiloni, was to ensure that Member States could have an equal footing when supporting companies, considering that Members have asymmetric access to those types of funds. Whether the EU will start to buy shares of struggling companies, and if yes, how much money will go where, remains to be seen (source: POLITICO).
- EnSUREing employment: The Commission’s employment reinsurance scheme SURE is under debate by the Council but might still need some time to get up and running. Three issues remain to be solved. First, Member States need to agree on a date for the sunset clause urged for by Finland and the Netherlands. Second, The Hague also wants to include health-related expenses in the scheme, covering costs of occupational health and safety and other types of spending. Third, Governments are not yet done debating guarantees. Member States need to issue €25 billion in guarantees to the Commission so it can raise €100 billion on international capital markets. But the exact provisions of the scheme remain a source of contention for those Members who fear they might have to cover for their neighbours with less financial firepower (source: POLITICO).
Tackling the Virus & Medical Procurement
- Healthcare recognition: The European Commission published guidelines for the cross-border recognition of healthcare qualifications and harmonisation on minimum training. To promote healthcare professionals’ mobility, countries could take a “more liberal” approach by requesting less documents and speeding up procedures. Where students are graduating early to fight the pandemic, the Commission still asks Member States to respect minimum training requirements, but also offers exceptions where needed.
- Faulty face masks: More and more reports surface about faulty face masks. Rapex, the alert system of the European Union, has voiced repeated concern over the quality and safety of some imported masks, saying that they might not sufficiently stop particles from passing through. German health insurers, too, warned that some of the masks the German health ministry had procured and distributed did not pass quality inspections and had not been tested sufficiently before delivery.
- Export Restrictions: German industry group BDI warns export restrictions introduced during the coronavirus crisis to counter supply shortages of masks and other protective gear send a “devastating signal” to trade partners. In a new paper on export controls, the group said such measures were counterproductive. POLITICO also reports the lobby was worried that any restrictions imposed during the crisis could stay on long afterward, pointing to a recent World Trade Organisation note, which argued that restrictions imposed in previous crises had often survived.
- Automobile: The four biggest sector associations, ACEA, CECRA, CLEPA and ETRMA, published a joint list of measures that in their eyes are paramount to promote the recovery of the European automotive sector. The list calls for more flexibility in competition rules, the deferral of consultations, and national renewal schemes with direct EU funding. The associations argue that an EU-wide premium scheme could contribute towards carbon neutrality and digitalisation. German car manufacturers met with Chancellor Merkel on Tuesday, 6th May, to discuss premiums. The industry leaders want programmes to include not only electric vehicles but greener combustion-driven cars as well. The Chancellery’s spokesperson said results of ongoing conversations were expected in June (source: POLITICO).