In view of the EU’s worsening image problem and the fairly deep divides within it, the Commission made a point of getting things back in hand, making multiple public statements and concentrating on what it could do itself. It relaxed its competition policy, adopting a temporary State aid framework on 19 March (which was then amended on 3 April); on the back of this, it has made more than 40 positive decisions on regimes notified to it by many member states, to help out sectors of the economy that are struggling due to the health emergency.
On 20 March, it took a radical and unprecedented step when it proposed to make use of the General Derogatory Clause of the Stability and Growth Pact, which was waved through by the finance ministers three days later, thereby allowing governments more freedom to spend public money as they see fit in the exceptional situation caused by the pandemic.
The Commission launched a European call for tenders for the acquisition of medical equipment used in the fight against the virus and to protect individuals (masques, gloves, ventilators, etc.). It floated a proposal for an initial investment initiative of €37 billion under the cohesion policy, to inject cash into the healthcare sector and small businesses. It increased financing for ‘coronavirus’ research actions under the Horizon 2020 programme to €48 million; 18 projects for vaccines, faster testing and the like have already been selected. It triggered the EU civil protection mechanism for Italy and called for the member states to build a common stock of medical equipment.
It went back to work on its 2018 proposal for forthcoming multi-annual financial framework (MFF), invoking the changed context brought about by the pandemic and the economic and social consequences of this. The new MFF will, as President von der Leyen herself put it, contain the equivalent of a ‘Marshall plan’ for economic recovery in Europe. Within this framework, sooner or later there is going to have to be a conversation about EU budgetary resources.
For its part, the European Central Bank announced a decision on 19 March for the mass buyback of shares (Pandemic Emergency Purchase Programme: €750 billion), to break the negative spiral dragging the markets down.
At its third meeting (held by video conference on 26 March), the European Council adopted a fairly substantial common declaration, encouraging the Commission’s efforts, laying emphasis on the proper functioning of the single market, the promotion of research and sharing of scientific information and the need for a roadmap with a view to a ‘coordinated exit strategy’ and an economic recovery plan.
The most important information broke on 9 April, following the meeting of the finance ministers (in ‘extended Eurogroup’ format), at which four measures were agreed upon: (1) within the European Stability Mechanism (ESM), the activation of lines of credit under more favourable conditions, valued at €240 billion; (2) the creation of a temporary and targeted Recovery Fund, to pay for economic recovery out of the future European budget; (3) support for the Commission’s proposal to create aid for national furlough payments (SURE instrument); (4) approval of the initiative of the European Investment Bank to set up a pan-European fund to provide guarantees for businesses, including SMEs, with an envelope of €200 billion (see EUROPE 12465/2).
This package, of a total price tag in excess of €500 billion, is still to be approved by the European Council on 23 April. Negotiations will have been extremely tough and not every wrinkle has so far been ironed out. If it gets the green light, it is worth reiterating that the measures available via both the EMS and SURE are in the form of loans. However, the member states that will need them the most are already heavily in debt; no doubt the interest rates will be more favourable than those available on the market, but it still gives rise to the concern that some states will be dragged further down in a spiral of extra debt that will have to be paid back at some point, widening economic gaps and increasing political tension within the Eurozone. In this context, the key question of European taxation cannot fail to come back to the fore.
COVID-19 has already cost a great deal in human terms and is affecting the normal functioning of the European institutions. In this situation of extreme emergency, a broadside of European measures going way beyond the current orthodoxy has followed the ‘every man for himself’ panic of the national authorities. The Parliament has come out of this temporarily weakened, despite its determination to ensure continuity of service.
Negotiations with the United Kingdom are on the back burner. Many ministerial meetings have been postponed, as have countless public conferences. The ‘European Semester’ remains on ice for now. There is deafening silence on the Conference on the Future of Europe, a major citizens’ forum of ideas and visions. Entire sectors are calling on Europe for help: farmers, fishermen, restaurateurs, theatre and cinema, airlines and many more, to say nothing of the developing countries that have been affected by the pandemic, which the EU has pledged not to forget.
The timetable of the European ‘Green Deal’ and Just Transition Mechanism has slowed; fears are being expressed that certain climate objectives may be sacrificed on the altar of economic recovery at all costs. But it must not be forgotten that air pollution, particularly in major conurbations, as well as deforestation and biodiversity loss, are factors that make the emergence of new viruses far more likely.
The challenge is immense and on a global scale. If the EU is to aspire to a leading role in the general interest, it first needs to show its internal efficiency, by transcending recurrent self-interests and reinvesting, together, in the health of all its citizens.
Renaud Denuit.
See part one: EUROPE 12466/1
See part two: EUROPE 12467/1
See part three: EUROPE 12468/1