The Association for Financial Markets in Europe (AFME) called on the European Commission and the Member States, on Tuesday 19 January, to take short-term measures to support European equity markets and hybrid financial products and to broaden corporate finance opportunities to foster post-Covid-19 economic recovery.
In a report published in partnership with PwC, AFME warns that Europe will need to close a €450-600 billion equity gap to prevent business failures and widespread job losses as public aid granted during the crisis is withdrawn.
The report reveals that 10% of European companies have sufficient cash reserves for only six months. Thus, according to the AFME, in the absence of urgent measures, a peak in insolvency could begin as early as this month.
In particular, the association calls for the establishment of a common and standardised recapitalisation instrument at EU level. It could, it says, be a new hybrid financial instrument to increase liquidity, designed specifically for the corporate sector, and could take the form of a privileged instrument, compatible with state aid, it explains.
Other recommendations include the introduction of tax incentives, such as time-limited capital gains tax exemptions, and the temporary adjustment of regulatory capital and solvency requirements. The association also suggests broadening the eligibility criteria for State Aid and extending repayment periods.
See the report: https://bit.ly/2Y6zlGt (Original version in French by Marion Fontana)