EU Insight, 22 May 2020

MITIGATING CRISIS AND ACHIEVING SUSTAINABLE GROWTH, TOP EU ECONOMIC PRIORITIES

The Commission issued country-specific recommendations providing economic policy guidance to all Member States. The recommendations focus on two objectives: in the short-term, mitigating the coronavirus pandemic’s severe negative socio-economic consequences; and in the short to medium-term, achieving sustainable and inclusive growth which facilitates the green transition and the digital transformation. All the recommendations call for investment in health, protecting jobs, providing liquidity to companies, promoting private investment and supporting the digital and green transition. Exceptionally, and since the general escape clause of the Stability and Growth Pact (SGP) was activated in March, no Member State will be placed under the excessive deficit procedure.

FRANCO-GERMAN RECOVERY STRATEGY INITIATIVE LIKELY TO SHAPE COMMISSION PROPOSAL

France and Germany presented a joint initiative for the European recovery from the COVID-19 crisis. The initiative has four pillars: i) developing the EU’s health sovereignty; ii) setting-up a €500 billion Recovery Fund; iii) speeding up the green and digital transitions; and iv) enhancing the EU’s industrial sovereignty. While the Council Presidency as well as Commission President von der Leyen welcomed the proposal, the so-called “frugal four” Member States (Austria, Denmark, the Netherlands and Sweden) signalled their resistance to the plan, which foresees EU borrowing to fund grants. The Commission will unveil its proposal on the EU Recovery Strategy next week.

TWO OUT OF THREE PILLARS OF EUROGROUP €540 BILLION PACKAGE SEALED

The Council adopted this week the €100 billion temporary unemployment reinsurance scheme (SURE), which constitutes one of three pillars under the €540 billion package the Eurogroup agreed on last month. The instrument, which should be available in July, will provide loans to Member States to finance measures related to national short-time work schemes and similar measures. In addition, the European Stability Mechanism (ESM) Pandemic Crisis Support – the second pillar of the package – became operational on 15 May. As for the third pillar – the European Investment Bank (EIB) guarantee scheme – discussions continued this week, with a view to reaching an agreement in the coming days.

NEW BIODIVERSITY AND FARM STRATEGIES CONTINUE TO BUILD ON EU GREEN DEAL

The European Commission presented its new Biodiversity Strategy to bring nature back into our lives, together with its Farm to Fork Strategy for a fair, healthy and environmentally friendly food system. In line with the European Green Deal, the strategies propose ambitious EU actions and commitments to halt biodiversity loss in Europe and worldwide and to transform the EU’s food systems into global standards for competitive sustainability, the protection of health as well as the livelihoods of all actors in the food value chain. The strategies also aim to strengthen resilience to future pandemics and threats such as climate impacts, forest fires, food insecurity or disease outbreaks.

EFFORTS TO BOOST COVID-19 RESEARCH AND INNOVATION CONTINUE

The Commission mobilised another €122 million from its research and innovation programme, Horizon 2020, for research into COVID-19. The new call for expressions of interest contributes to the Commission’s €1.4 billion pledge to the Coronavirus Global Response initiative, launched earlier this month. The projects funded under this call should repurpose manufacturing for rapid production of vital medical supplies and equipment needed for testing, treatment and prevention, as well as develop medical technologies and digital tools to improve detection, surveillance and patient care. The deadline for submission of project proposals is 11 June.

COMING UP NEXT WEEK

• 25 May: Informal video conference of the members of the European Economic Area Council. On the agenda: overall functioning of the EEA Agreement, effect of COVID-19 on the Internal Market.
• 26 May: Video conference of ministers for European affairs. On the agenda: coordination of COVID-19 de-escalation measures, economic and social recovery of the EU.
• 27 May: European Parliament plenary session. On the agenda: EU Recovery Plan, including Council and Commission statements.
• 29 May: Video conference of foreign affairs ministers.
• 29 May: Video conference of ministers of research.
• 29 May: Video conference of ministers responsible for space.

Karl Isaksson, Managing Partner Brussels, Kreab