The Three R’s of the EU Economic Response to COVID: Relief, Resilience & Recovery
While the European Union was initially one of the regions hardest hit by the coronavirus, the EU’s swift and decisive coordinated actions have helped many of its Member States mitigate the impact of the pandemic and shore up their economies, the EU’s head of international economic relations told a US business audience this month.
Speaking at a webinar hosted by the EU Delegation to the United States in partnership with the European American Chamber of Commerce, Elena Flores, Director for international economic and financial relations and global governance at the European Commission, explained how the EU’s response to the COVID-19 outbreak followed a strategy centered around relief, resilience and recovery.
Given some divergence among Member State responses, Flores said, “It’s clear that we need to cooperate in this endeavor that we are all facing.”
Watch the full webinar below.
Register for the EU’s next economic webinar, Europe and the Great Lockdown: Economic Outlook & Policy Priorities to Reopen the EU Economy: here.)
The initial response — relief — focused on immediate needs to address the crisis. To ensure Member States had the proper resources to combat the virus, the EU organized a joint procurement of medical supplies to avoid Member States competing against each other to acquire needed equipment, facilitated the production of personal protective equipment, and created strategic reserves of emergency medical equipment. At the same time, the Commission ensured that mobility restrictions imposed to prevent the spread of the virus would not hamper the correct functioning of the single market.
The second phase — resilience — attempts to bridge the economy during the lockdown. To this end, several measures have been put in place. The activation of the escape clause of the Stability and Growth Pact suspended fiscal rules, allowing Member States to take necessary financial action to support their healthcare industries and counter the economic impact of stay-at-home orders. Temporary rules for State Aid ensured that the public support for enterprises would be compatible with ensuring a level playing field. Finally, the Eurogroup (comprised of finance ministers from countries that use the Euro currency) made available a €540 billion support package to help workers, businesses, and Member States through the lockdown.
Flores said that the fact the EU had pre-established structures and institutional frameworks was key to their rapid response to COVID-19, making it simply “a matter of increasing the capacity of the existing instruments and tweaking them to better meet needs,” she said.
The EU’s social protection system, for example, which covers healthcare and unemployment support, did not need to be defined from scratch — it simply needed to be activated, she said. Similarly, distribution channels for loan guarantees and support for small and mid-size businesses were also already in place through the European Investment Bank and other national banks, which meant they could be activated quickly.
Although the shock is affecting all of Europe, Member States have asymmetric capacity to respond, which ultimately creates the risk that the recovery will be asymmetric, Flores said. The European Commission is therefore now planning the recovery phase. The recovery package is not yet final, but it will have a public investment component and a component aimed at improving the framework for triggering private investments.
When asked how long governments could shoulder high-cost economic recovery plans, Flores made no predictions for the duration of the pandemic and its economic toll. For now, she said, monetary policies have been enhanced around the world and are likely to stay for quite some time. It will take a combination of restarting the private sector economy and intelligent removal of public support measures to cross the bridge to a full recovery.
To learn more about the EU’s response to the COVID-19 pandemic, click here.
Register for the EU’s next economic webinar, Europe and the Great Lockdown: Economic Outlook & Policy Priorities to Reopen the EU Economy.
