*** modified Tuesday 16 February 2pm ***
On Monday 15 February, the euro area Finance Ministers took stock of the economic situation and began a discussion on the development of budgetary support for economic operators in a context of economic recovery, the extent of which in 2021 will depend on the speed of deployment of the Covid-19 vaccines.
In light of the uncertainties surrounding the recovery, the President of the Eurogroup, Paschal Donohoe, noted that it is necessary that citizens continue to be protected and that supportive economic policies remain in place, knowing that there is “inherent risk of withdrawing support too early as opposed that removing it too late”. He indicated that the Eurogroup will regularly discuss the appropriate budgetary positioning for 2022 in order to reach a position on a European recommendation “by the summer”, in time for the presentation of the national draft budget plans.
The Commissioner for Economy, Paolo Gentiloni, indicated that the European Commission will present “in early March” guidelines , including “parameters” that will make it possible to decide whether or not the Stability and Growth Pact will continue to be frozen next year.
Since the beginning of the pandemic, the cumulative budgetary measures have reached 4% of the European Union’s GDP and the public guarantees granted have reached 19%, noted the Commissioner for Economy (see EUROPE 12656/1).
However, Mr Donohoe also admitted that a difficult period lies ahead, as public authorities will have to target their support to businesses more closely.
France advocates maintaining public support as long as restrictions related to the health situation are in place. According to Paris, this aid should evolve from support for the liquidity of companies to support for the equity of viable companies.
The ‘Ecofin’ Council will discuss this subject again on Tuesday 16 February. In a note to the European Finance Ministers, the Portuguese Presidency of the EU Council points out that the economic crisis caused by the pandemic will have an “asymmetric”, negative impact depending on the Member States and sectors of activity.
Mr Gentiloni noted that 8% of the manufacturing sector was receiving support, while nearly 75% of the hotel and restaurant sector is subject to public aid.
According to the Portuguese Presidency, the asymmetrical impact of the pandemic could be exacerbated in the future depending on the length of time that budgetary measures are maintained and the rate at which they are lifted (liquidity support, public guarantees, moratoria on loan repayments, aid for short-time working).
“A key short-term policy challenge will be to distinguish between the viable and non-viable firms, to allow for an efficient allocation of resources and, at the same time, not unduly destroy the production capacity”, notes the Portuguese Presidency.
At the European Economic and Social Committee, the Employers’ Group is advocating a shift in support. “The measures taken since the outbreak of the epidemic have helped European companies to maintain their level of liquidity. However, the time has come to strengthen their solvency and viability”, it said in a statement. (Original version in French by Mathieu Bion)