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In recent weeks, the European Commission has acted to provide Member States with all the flexibility they need to financially support their healthcare systems and their businesses and workers. In doing this, the Commission is acting on its conviction that the only effective solution to the crisis in Europe is one based on cooperation, flexibility and, above all, solidarity.

The coronavirus outbreak is testing Europe in ways that would have been unthinkable only a few weeks ago. The depth and the breadth of this crisis requires a response unprecedented in scale, speed and solidarity.

The Commission has acted to coordinate, speed up and reinforce the procurement efforts of medical equipment and has directed research funding to the development of a vaccine. It has worked tirelessly to ensure that goods and cross-border workers can continue to move across the EU, to keep hospitals functioning, factories running and shop shelves stocked.

Commission President Ursula von der Leyen explains: “In this coronavirus crisis, only the strongest of responses will do. Every available euro in the EU budget will be redirected to address it, and every rule will be eased to enable the funding to flow rapidly and effectively. With a new solidarity instrument, we will mobilise €100 billion to keep people in jobs and businesses running. This is European solidarity.”

Pandemic Crisis Support

On April 9, EU finance ministers agreed a €540 billion package to support Europe's economies through the Covid-19 crisis. The European Stability Mechanism will provide pandemic crisis support, in the form of precautionary credit lines.

Secondly, the Eurogroup endorsed SURE, the Commission’s temporary solidarity instrument, to provide loans granted on favourable terms to Member States with a view to protecting workers and jobs in the current crisis. In addition, the European Investment Bank Group is creating a pan-European guarantee fund of €25 billion, which could support €200 billion of financing for companies throughout the EU, with a focus on SMEs.

In Association with

The Eurogroup also agreed to explore the establishment of a temporary Recovery Fund to ensure a robust economic recovery in all Member States.

Mitigating Employment Risks

SURE (Support to mitigate Unemployment Risks in an Emergency) was proposed by the Commission to provide up to €100 billion in loans to countries that need it to ensure that workers receive an income and businesses keep their staff.

Financial assistance under the SURE instrument will take the form of a loan from the EU to the Member States that request support. The initiative will support short-time work schemes and similar measures to help Member States protect jobs, employees and self-employed against the risk of dismissal and loss of income.

By avoiding wasteful redundancies, short-time work schemes can prevent a temporary shock from having more severe and long-lasting negative consequences on the economy and the labour market in Member States. This helps to sustain families' incomes and preserve the productive capacity and human capital of enterprises and the economy as a whole.

Coronavirus Response Investment Initiative

In its initial response, the European Commission established the Coronavirus Response Investment Initiative (CRII) to help Member States fund their coronavirus crisis response. It combines the mobilisation of immediate financial support from the structural funds to address the most pressing needs with the maximum possible flexibility in the use of the funds.

The initiative gives Member States an upfront cash injection of €8 billion from the EU cohesion funds, which could accelerate up to €37 billion of European public investment to fight the coronavirus. Member States will now be able to fully mobilise all the non-utilised structural funds, save lives and support companies by addressing the direct and indirect effects of the coronavirus outbreak. Using guarantees, e.g. for SME working capital, could leverage even higher amounts.

A subsequent CRII package announced in April introduced more flexibility, such as transfer possibilities across the three cohesion policy funds. There will also be the possibility for a 100% EU co-financing rate for cohesion policy programmes, allowing Member States to benefit for full EU financing for crisis-related measures.

Amendments to the European Maritime and Fisheries Fund will provide support for temporary cessation of fishing activities, and for the suspension of production and additional costs for the aquaculture farmers, as well as to producer organisations for the storage of fishery and aquaculture products. Under the European Agricultural Fund for Rural Development, farmers and other rural development beneficiaries will be able to benefit from loans or guarantees of up to €200,000 at favourable conditions.

The hardest-hit Member States can also rely on up to €800 million from the EU Solidarity Fund. The Commission’s economic measures will complement the European Central Bank’s €750 billion Pandemic Emergency Purchase Programme of private and public securities during the crisis.

State Aid Rules Relaxed

The Commission’s new State Aid Temporary Framework provides for five types of aid measures:

• Targeted support in the form of deferral of tax payments and/or suspensions of social security contributions.
• Targeted support in the form of wage subsidies for employees.
• Support for coronavirus-related R&D.
• Support for the construction and upscaling of testing facilities.
• Support for the production of products relevant to tackle the coronavirus outbreak.

Executive Vice-President Margrethe Vestager commented: “We have extended the temporary framework to give Member States further possibilities to ease liquidity constraints faced by companies and save jobs in sectors and regions that are hit particularly hard by this crisis.”

Availing of this temporary framework, Enterprise Ireland has launched a new €180 million scheme for businesses impacted by Covid-19. The Sustaining Enterprise Fund is available to assist companies in the manufacturing and internationally traded services sectors that have suffered, or expect to suffer, a 15% or more reduction in turnover or profits or an increase in costs as a direct result of Covid-19.

Funding of up to €800,000 will allow eligible businesses to access the necessary liquidity and funding to sustain their businesses in the short to medium term. The Sustaining Enterprise Fund will be available to companies who are unable to access adequate funding from the market, financial institutions or the Strategic Banking Corporation of Ireland.

Finance Guarantees

The European Commission has also unlocked €1 billion from the European Fund for Strategic Investments that will serve as a guarantee to the European Investment Fund (EIF), part of the European Investment Bank group. This will allow the EIF to issue special guarantees to incentivise banks and other lenders to provide liquidity to at least 100,000 European SMEs and small mid-cap companies hit by the economic impact of the coronavirus pandemic, for an estimated available financing of €8 billion.

The €1 billion unlocked from the EFSI under the COSME Loan Guarantee Facility and the InnovFin SME Guarantee under Horizon 2020 allows the EIF to provide guarantees worth €2.2 billion to financial intermediaries, unlocking €8 billion in available financing.

The guarantees will be offered through the EIF to the market, via a call for expressions of interest to several hundred banks and alternative lenders. Key features of these guarantees include a higher risk cover of up to 80% of potential losses on individual loans as opposed to the standard 50%, and more flexible terms, including postponement, rescheduling or payment holidays.

SMEs will be able to apply directly to their local banks and lenders participating in the scheme, which will be listed on www.access2finance.eu.

Photo: Commission President Ursula von der Leyen