COVID-19: Commission sets out European coordinated response to counter the economic impact of the Coronavirus
COVID-19 is a severe public health emergency for our citizens, societies and economies with infections in all Member States. It is also a major economic shock to the EU.
The Commission therefore presents today an immediate response to mitigate the socio-economic impact of the COVID-19 outbreak, centred on a European coordinated response.
The Commission will use all the instruments at its disposal to mitigate the consequences of the pandemic, in particular:
– To ensure the necessary supplies to our health systems by preserving the integrity of the Single Market and of production and distribution of value chains;
– To support people so that income and jobs are not affected disproportionally and to avoid permanent effect of this crisis;
– To support firms and ensure that the liquidity of our financial sector can continue to support the economy
– And to allow Member States to act decisively in a coordinated way, through using the full flexibility of our State Aid and Stability and Growth Pact Frameworks.
President of the European Commission, Ursula von der Leyen, said: “The Coronavirus pandemic is testing us all.
This is not only an unprecedented challenge for our healthcare systems, but also a major shock for our economies. The important economic package announced today deal with the situation of today.
We stand ready to do more as the situation evolves. We will do whatever is necessary to support the Europeans and the European economy.”
State aid Framework Flexibility
The main fiscal response to the Coronavirus will come from Member States’ national budgets. EU State aid rules enable Member States to take swift and effective action to support citizens and companies, in particular SMEs, facing economic difficulties due to the COVID-19 outbreak.
Member States can design ample support measures in line with existing EU rules. First, they can decide to take measures, such as wage subsidies, suspension of payments of corporate and value added taxes or social contributions.
In addition, Member States can grant financial support directly to consumers, for example for cancelled services or tickets that are not reimbursed by the operators concerned. Also, EU State aid rules enable Member States to help companies cope with liquidity shortages and needing urgent rescue aid.
Article 107(2)(b) TFEU enables Member States to compensate companies for the damage directly caused by exceptional occurrences, including measures in sectors such as aviation and tourism.
Currently, the impact of the COVID-19 outbreak in Italy is of a nature and scale that allows the use of Article 107 TFEU. This enables the Commission to approve additional national support measures to remedy a serious disturbance to the economy of a Member State.
The Commission’s assessment for the use of Article 107.b for other Member States will take a similar approach. The Commission is preparing a special legal framework under Article 107(3)(b) TFEU to adopt in case of need.
The Commission stands ready to work with all Member States to ensure that possible national support measures to tackle the outbreak of the COVID-19 virus can be put in place in a timely manner.
European Fiscal Framework Flexibility
The Commission will propose to the Council to apply the full flexibility provided for in the EU fiscal framework so that they can implement the measures needed to contain the coronavirus outbreak and mitigate its negative socio-economic effects.
First, the Commission considers that the COVID-19 pandemic qualifies as an “unusual events outside the control of government”. This allows accommodating exceptional spending to contain the COVID-19 outbreak such as health care expenditure and targeted relief measures for firms and workers.
Second, the Commission will recommend adjusting the fiscal efforts required from Member States in case of negative growth or large drops in activity.