The Vice-President of the European Commission, Valdis Dombrovskis, stressed on Monday 27 April the importance of thinking outside the box when drawing up the European Union’s Recovery Fund to kick-start the European economy after the COVID-19 pandemic (see EUROPE 12473/1 and 12474/1).
“Thinking outside the box is essential to achieving an ambitious proposal” for the Recovery Fund, even if constraints such as the need for a balanced EU budget have to be taken into account, Mr Dombrovskis declared during a debate in the European Parliament’s Economic and Monetary Affairs Committee. Economics Commissioner Paolo Gentiloni said the EU’s response must be commensurate with the “unprecedented recession” ahead and the risk of fragmentation of the internal market due to different margins for manoeuvre in different national budgets.
Both stressed the importance of continuing to implement the climate and digital agendas through the financing for the economic recovery. On 7 May, the Commission will present its spring economic forecasts, which, according to Mr Gentiloni, should be close to those of the IMF, which anticipates a 7.5% GDP recession in the euro area for 2020.
Several MEPs asked the commissioners about the shape of the forthcoming Recovery Fund, which is in the pipeline within the Commission, including its connection to the 2021-2027 Multiannual Financial Framework (MFF) and the nature of the aid.
According to Jónas Fernández (S&D, Spain), the fund will have to provide grants, so as not to further complicate the fiscal situation in Member States that are going into massive debt to tackle coronavirus. On the other hand, Johan Van Overtveldt (ECR, Belgium) considered that subsidies would have the effect of transforming “the EU into a Union of transfers” between budgets. “I can confirm that there will be a combination of grants and loans”, he said.
In response to Hélène Laporte (Identity and Democracy, France), both Commissioners stressed that the Recovery Fund will not mutualise existing public debt at the European level. “All Member States support the chosen solution”, noted Mr Dombrovskis, i.e. that the Commission should raise capital on the markets through the provision of a public guarantee.
Enikő Győri (EPP, Hungary) expressed concern about a potential lack of equity between countries inside and outside the euro area in terms of the conditions attached to the financial assistance. Mr Dombrovskis replied that non-euro area countries using the balance of payments facility would be “more or less” on a par with those activating a European Stability Mechanism credit line.
Taxation. Asked by Sven Giegold (Greens/EFA, Germany) whether they were prepared to immediately adopt “zero tolerance” on tax fraud and money laundering at a time when public spending is rising across the EU, Dombrovskis and Gentiloni assured them that these issues remain high on the Commission’s agenda.
The presentation of the Action Plan on the fight against money laundering (see EUROPE 12447/21) at the beginning of May and the presentation of the Action Plan on the fight against fiscal fraud (see EUROPE 12440/20) at the end of June will be accompanied by “strong” legislative initiatives, Mr Gentiloni promised.
Banks. On Tuesday 28 April, the Commission will supplement its anti-crisis arsenal by relaxing prudential banking rules to make it easier for banks to grant loans (see EUROPE 12474/2). It will present an interpretative communication on how to use the regulatory flexibility granted by EU legislation during the pandemic.
This communication will be accompanied by a proposal for “targeted and temporary” amendments to the regulatory framework, including “transitional provisions to allow banks to mitigate the impact on regulatory capital of the provisioning for expected credit losses under IFRS 9”, Dombrovskis said.
The amendments will also aim to align with the Basel Committee’s decision to postpone the Basel III banking reform by one year. (Original version in French by Mathieu Bion and Marion Fontana)