Ref. Ares(2020)1589838 - 16/03/2020
Ref. Ares(2020)4433557 - 26/08/2020
STATEMENT
16 March 2020
Responsibility, Action and Solidarity is urgently required to
protect businesses, society and our economy
European society is facing an extraordinary challenge from the outbreak of COVID19.
Our sympathies are with the families of those who have already lost loved ones, and our
gratitude is to the workers and businesses who are already showing exceptional courage
and resilience, both to treat the sick, and to maintain the vital goods and services upon
which we all depend.
It is clear that we are only at the beginning of this challenge. Protecting our society will
require extraordinary
responsibility, action and solidarity from all parties:
•
Responsibility as businesses, workers and citizens, to ensure everything we do
helps address this crisis.
•
Action both to maintain the essential functioning of our economy in the immediate
future, and ensure that once the spread of the virus is addressed, we have
maintained the business eco-system vital to fully restoring our treasured European
way of life.
•
Solidarity between businesses of all size, between businesses and governments
and between all EU member states.
COVID19 will have a significant impact on short-term EU growth
COVID19 will undoubtably have a significant impact on EU growth in 2020. Whilst the
size of the short-term fall in economic activity will clearly dependent both on the spread
of the virus and the extent of measures taken to prevent the spread of the virus, it is
already clear from developments in recent days that the
impact will be substantial, with
the
likelihood of a large number of EU member states experiencing a significant,
and in some cases massive, short-term downturn. Businesses are already observing
economic impacts through two broad routes:
• Firstly, we are already seeing significant reduction in economic activity through
the
restrictions on movement and contact put in place in a number of Member States.
Whilst these measures will clearly have a huge impact on businesses, particularly
SMEs, operating in sectors, such as tourism, hospitality, restaurants, leisure and
retail, the likelihood of knock-on impacts to other sectors should not be overlooked.
• Secondly, as a result to the disruption to Chinese manufacturing already taken place,
some EU manufacturers are likely to face disruption to their production given
shortage of supplies. The spread of the virus within the EU itself, and the potential
disruption of manufacturing activity from the
closure of manufacturing sites due to
COVID19 instances creates a second route through which EU production could be
1
significantly impacted. In addition, the
blockading of key cross-European
transportation routes is likely to further exacerbate disruptions to supply chains.
We have also seen
significant volatility in financial markets, which has the potential
to exacerbate, particularly these demand effects, with falling financial markets reducing
both consumers and business confidence and in turn, consumption and investment
respectively.
Responsibility
The immediate objective of public authorities must be to seek to ensure the
right
balance between safeguarding public heath by reducing the spread of the virus
and maintaining vital economic activity. This requires all economic players, including
businesses, workers and consumers, to take responsible action to reduce the spread of
the virus.
Action
Many businesses, particularly SMES, are already facing, or will face, severe financial
pressures during the coming months. In order both to help maintain confidence across
the business community,
protect the business eco-system, and ensure that
as many
companies as possible survive the present difficulties and are able to help drive the
economic recovery when restrictions related to the virus are lifted, a comprehensive
package of measure is urgently required.
•
Monetary policy needs to remain supportive, and we count on the ECB, working
alongside institutions such as the EIB, to continue to put in place appropriate
measures as the situation develops. This includes, in particular,
ensuring adequate
liquidity to the financial system, particularly to
ensure adequate lending remains
in place for businesses. The Targeted Longer-term Refinancing Operation
(TLTRO) programmes should be extended in time and scope.
•
Financial regulator and supervisors should stand ready to provide further
measures to stabilise financial markets, for example those for corporate and bank
bonds with specific measures required to maintain access to finance to the real
economy including, creating a
moratorium tool for sound borrowers facing
liquidity challenges related to COVID-19 effects, and
postponing until the
economy enters a more stable period, the introduction on any proposals which
have the potential to reduce lending to businesses, including the
introduction of
new macroprudential measures, capital increases associated with the target
review of internal models, and the finalisation of Basel III proposals.
2
•
Fiscal policy must also be supportive in the light of extraordinary, temporary falls in
domestic demand. Member States must therefore be temporarily allowed to
use the
maximum flexibility built into the Stability and Growth Pact, including through
giving consideration to its possible temporary suspension by use of the general
escape clause.
Similar flexibility should be extended to countries presently required
to achieve high primary surpluses within the context of post-programme surveillance
agreements. Such measures are likely to include broad measures to support
consumer demand, increased expenditure related to the virus, notably around health
care, as well as direct support to businesses (outlined below). In order to ensure
that Member States are able to undertake such expenditure with confidence, it is
important that the
Commission provides the maximum possible clarity regarding
how it intends to apply the discretion provided for in the SGP at the earliest possible
opportunity. The exceptional circumstances in some Member States may make it
necessary that the Commission and Council consider going beyond these provisions
in order to allow for
an ambitious fiscal stimulus, co-ordinated between Member
States and the EU institutions. In the medium-term, Member States should also
consider
bringing forward public investment, including planned repairs and
maintenance as a means of providing an additional stimulus.
•
Specific measures are required to support companies with viable long-term
business models to survive the present downturn. There is a significant risk of
substantial numbers of companies, particularly SMEs, experiencing both liquidity and
solvency issues as a result both of the COVID19 itself, or of responsible actions taken
to prevent the spread of the virus (such as temporary closure of production
premises).
Member States need to continue to urgently develop and implement specific measures
to support such businesses, examples include:
• providing state guarantees for credit lines to businesses.
• postponing tax payments and social security contributions, and consider targeted
reductions in VAT rates.
• providing financial support for companies for short-time working, either as result of
the need to close premises directly impacted by the virus, government restrictions or
in response to falling demand.
• Flexibility around unemployment insurances schemes to support businesses and
workers.
• Providing necessary clarity regarding ‘force majeure’ clauses. The EU should
encourage Member States to consider Covid-19 in conjunction with other relevant
factors (e.g. travel bans, work stoppages, shop forced closures) as a situation of
force majeure affecting contractual relationships.
3
• Suspension of fines to companies as a result of late payment or non-completion of
government contracts.
Member States should also
fast-track implementation of the EU’s insolvency
directive in order to further help viable businesses survive the present difficulties.
At European Union level:
• The Commission must stand ready
to scale up the €37 bil ion ‘
Corona Response
Investment Initiative’, aimed at supporting health care systems, SMEs, labour
markets and vulnerable parts of the economy. EU funding must lead to
genuinely
additional support reaching EU businesses and workers, beyond that already
planned by Member States.
• Further immediate support should be provided by the
redirection of unallocated
structural funds to support vulnerable businesses, as well as rapid activation of the
EU solidarity fund for health emergencies, with the EU also having an essential role
to co-ordinate and inform regarding actions taken in Member States.
Deadlines
related to ongoing and future grants and contracts must be postponed and
adapted to meet the needs of actual and potential participants.
• There must be
flexibility around the implementation of state aid rules, provided
this continues to support the objective of providing a level playing field for businesses
across the single market.
•
A European recovery plan must be put in place, facilitated by rapid agreement on
a new Multi Annual Financial Framework (MFF), reducing uncertainty regarding EU
investment funding from 2021. Such a plan, which should include a significant role
for
InvestEU, should give consideration to reducing national co-financing rates, as
well as postponing proposal and reporting deadlines for existing programmes. Given
the exceptional circumstances, it may also be necessary to reduce national co-
financing rates for a limited period.
•
A new European e-health plan must be developed, including a centralized
mechanism at EU level to monitor the entire value chain in the healthcare sector.
Solidarity
Meeting the challenge of COVID19, and ensuring that we come through this difficult
period with both a limited human cost and with businesses able and ready to rapidly
restore our normal way of life, will require us to
draw on our solidarity across Europe.
Solidarity is important to protect our health, our businesses and our European society.
The European business community calls on all players to act with a sense of
4
responsibility,
to avoid damage to our business eco-system, as well as the functioning
of the European Union.
The Internal Market must be protected, with the Commission closely monitoring any
distortion of the internal market and discouraging the creation of national barriers that do
not respect the principle of solidarity and proportionality, as established in the
treaties. In particular,
transportation of goods within the EU single, market, for
example by trucks, must not be blocked. Cross-border access for critical
manufacturing and medical equipment maintenance services must be ensured, and
export bans recently introduced by member states on personal protective equipment,
medical equipment and medical devices must be urgently removed.
This solidarity must extend across the business community, between the smallest SME
and the largest multi-national, between businesses and governments, and between
countries across our continent.
We also call on our major trading partners to seek to maintain essential global supply
chains to the best extent possible, by ensuring that actions they take to reduce the spread
of the virus are both targeted and proportionate, avoiding trade and export bans.
In this context we already welcome the strong commitment taken by EU institutions to
address the crisis, welcoming statements in particular by:
•
EU finance ministers on 4th March, regarding their commitment to provide a co-
ordinated response and to use all appropriate policy tools to achieve strong,
sustainable growth and to safeguard against the further materialisation of
downside risks.
•
Commission President von der Leyen on 10th March, ‘to use all the tools at our
disposal to make sure the European economy weathers this storm’,
complemented by a
package of measures presented on March 13th, to deliver
a co-ordinated European response to mitigate the socio-economic impact of the
COVID-19 outbreak.
•
The ECB on 12th March announcing in particular, plans to temporarily relax
capital requirements for the financial sector to support lending to the real
economy, as well as more accommodative monetary policy through increasing
its asset purchases by €120 bil ion during 2020.
The European business community believes Europe will only succeed if we work
together in a spirit of solidarity. The time for common action is now. We need a bold and
co-ordinated approach.
5