#EuropeansAgainstCovid19

The EU’s response to the coronavirus crisis

The coronavirus pandemic presents the EU with challenges of historic proportions. We can only succeed in overcoming these challenges if we work together – to protect people’s health, safeguard jobs and stimulate economic recovery.

Together for Europe’s recovery – we will succeed if we act decisively and in solidarity.
Olaf Scholz, German Finance Minister

Working together to overcome the crisis

Managing and overcoming the coronavirus crisis will be the primary task during Germany’s Council Presidency. A first key step to mitigate the pandemic’s immediate effects was already taken in April: the EU adopted a €540 billion solidarity package to support short-term work schemes in the member states, to provide targeted assistance to small and medium-sized businesses, and to ease the burdens on government finances. The essential task now is to take action that will renew the EU’s strength and make it fit for the future. Based on a German-French initiative and European Commission proposals, the EU member states agreed on the Next Generation EU recovery plan in July, with a volume of €750 billion.

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Next Generation EU
Next Generation EU

To help the European economy recover and grow in the aftermath of the coronavirus crisis, the EU member states have agreed on the Next Generation EU recovery plan, with a volume of €750 billion. Under this plan, the European Commission will be able to borrow on the financial markets, allowing it to support the hardest-hit countries and regions with grants and loans from EU budgetary programmes. 

Kick-starting the future – promoting investment and innovation

In addition to the EU solidarity package amounting to €540 billion, the issue of how to overcome the crisis and its costs in the medium to long term will be a key priority of Germany’s Council Presidency. For this reason, Germany teamed up with France in May 2020 to propose a large European recovery fund. The European Commission developed this proposal into a comprehensive recovery plan. The heads of state and government of the EU member states agreed on the Next Generation EU recovery plan at the Special European Council of 17-21 July 2020, thus sending out an important signal of solidarity, cooperation and willingness to carry out reforms in Europe.

The recovery plan will run from 2021 to 2023 and will have a total volume of €750 billion. The European Commission will be able to borrow the necessary resources on the financial markets, allowing it to support the hardest-hit countries and regions with grants and loans. This borrowing by the European Commission will, however, remain an exception. It will have a clearly defined scope, be time-limited and be tied to binding repayment requirements. Taken in total, European assistance measures will add up to the enormous amount of nearly €1.3 trillion – and this does not even include the comprehensive national assistance programmes.

The decisions on the recovery plan is closely tied to the European Council’s decision on the Multiannual Financial Framework, which sets out the EU budget for the next seven years. These decisions now need to be implemented in cooperation with the European Parliament.

 

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Pandemic Crisis Support
Pandemic Crisis Support

The European Stability Mechanism (ESM) has set up a Pandemic Crisis Support programme, which is based on the ESM's existing precautionary credit lines. This programme provides EU member states with the option of applying for a precautionary credit line of up to 2 percent of their respective GDP (reference year 2019) for the purpose of managing the effects of the coronavirus crisis. The programme has a total volume of €240 billion. Loans must be used to finance healthcare measures to mitigate the effects of the Covid-19 pandemic.

Government assistance: The European Stability Mechanism’s credit lines

The coronavirus pandemic has had an enormous impact on economies in Germany and Europe and around the world. The crisis places jobs and livelihoods at risk while also posing a threat to social institutions and public budgets. This makes it all the more important for the affected countries to work together. We can overcome such crises more easily if we collaborate on solutions. For this reason, European finance ministers reacted quickly and decisively by launching a comprehensive package of measures. This EU solidarity package makes use of the European Stability Mechanism (ESM), which has proved effective in managing crises in recent years. The ESM acts as a firewall for the 19 eurozone countries.

Euro area member states that are especially hard-hit financially as a result of the pandemic can receive special assistance from the Pandemic Crisis Support programme in the form of precautionary credit lines. This means that each eurozone country has the option to apply for a precautionary credit line of up to 2 percent of the country’s GDP. This amounts to a total volume of €240 billion for the eurozone as a whole. If a country has to tap its credit line, loans will be provided at especially favourable conditions. Such loans must be used exclusively to finance healthcare measures aimed at directly or indirectly mitigating the effects of the Covid-19 pandemic.

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540

€540 billion: size of the EU solidarity package to deal with the coronavirus crisis and its immediate effects

750

€750 billion: volume of the Next Generation EU economic recovery plan according to the decision made by the European Council in July

7.4

€7.4 billion: amount mobilised by the EU for research into a vaccine as part of its Global Response initiative

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Pan-European Guarantee Fund
Pan-European Guarantee Fund

The European Investment Bank (EIB) has set up a pan-European guarantee fund through which businesses – especially SMEs – will be provided with liquidity during the coronavirus crisis. The fund will be equipped with €25 billion in pro rata contributions from the member states. This will enable the EIB to mobilise up to €200 billion in financial assistance.

Support for the economy: The European Investment Bank’s guarantee fund

Businesses all over Europe are facing unprecedented challenges during the coronavirus crisis as a result of the restrictions that had to be imposed on economic and social activities. Supply chains have been disrupted and sales are collapsing. In particular, many small and medium-sized enterprises (SMEs) have very quickly found themselves facing the challenge of how to maintain liquidity and avoid going bankrupt, which would cause job losses. The EU’s solidarity package to deal with the coronavirus crisis therefore also includes a liquidity programme intended to help companies with cashflow problems and to protect jobs.

The programme is implemented by the European Investment Bank (EIB). A Pan-European Guarantee Fund has been established at the EIB which will support the financing of SMEs. Member states will provide the fund with budgetary guarantees totalling €25 billion. As a result, the EIB Group can use various mechanisms to mobilise around €200 billion in assistance for businesses.

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SURE
SURE

SURE stands for "Support to mitigate Unemployment Risks in an Emergency". This temporary programme aims to protect jobs and workers in the EU during the coronavirus crisis. To this end, the European Commission will make up to €100 billion available for loans to support short-time work schemes and similar measures in EU member states.

Protecting jobs: European Commission support programme for short-time work schemes

Short-time work (known as Kurzarbeit in German) refers to a temporary reduction in normal working hours within a company. This could be necessary because, for example, there is not enough work or the production of goods must be cut back or halted. Short-time work schemes can play an important role in preventing redundancies in this type of situation. Compensation for short-time work can make up for employees’ lost earnings, at least to a certain extent, thereby safeguarding livelihoods. These schemes also allow companies to react flexibly to a temporary lack of work or production halts without having to make workers redundant prematurely.

The European Commission’s SURE programme is the third pillar of the EU’s solidarity package. It offers EU member states loans at favourable conditions. With the help of these loans, countries can make money available to companies for short-time work schemes, which will be paid out to employees. The SURE programme has a total volume of €100 billion.

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