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EU proposes to direct EUR 37 bln under cohesion policy to fight against coronavirus crisis

BC, Riga, 13.03.2020.Print version
The European Commission is proposing to direct 37 bn euros under EU cohesion policy to the fight against the coronavirus crisis, informed LETA.

To this effect, the European Commission proposes to relinquish this year its obligation to request member states to refund unspent pre-financing for the structural funds, spokespeople for the European Commission's representation in Estonia said.

This amounts to about eight billion euros from the EU budget, which member states will be able to use to supplement 29 bn euros of structural funding across the EU. This will effectively increase the amount of investment in 2020 and help to front-load the use of the as yet unallocated 28 bn euros of cohesion policy funding within the 2014-2020 cohesion policy programs.

The Commission calls upon the European Parliament and the Council to swiftly approve this proposal, so that it can be adopted within the next two weeks.

In addition, the Commission is proposing to extend the scope of the EU Solidarity Fund by also including a public health crisis within its scope, in view of mobilizing it if needed for the hardest hit member states. Up to 800 mln euros is available in 2020. 

COVID-19 is a severe public health emergency for our citizens, societies and economies with infections in all member states. It is also a major economic shock to the EU. The Commission therefore presents on Friday an immediate response to mitigate the socio-economic impact of  the COVID-19 outbreak, centered on a European coordinated response, the Commission said.

The main fiscal response to the coronavirus will come from member states' national budgets. EU state aid rules enable member states to take swift and effective action to support citizens and companies, in particular small and medium-sized enterprises (SMEs), facing economic difficulties due to the COVID-19 outbreak.

Member states can design ample support measures in line with existing EU rules. First, they can decide to take measures, such as wage subsidies, suspension of payments of corporate and value added taxes or social contributions.

In addition, member states can grant financial support directly to consumers, for example for cancelled services or tickets that are not reimbursed by the operators concerned. Also, EU state aid rules enable member states to help companies cope with liquidity shortages and needing urgent rescue aid.

The Treaty on the Functioning of the European Union (TFEU) enables member states to compensate companies for the damage directly caused by exceptional occurrences, including measures in sectors such as aviation and tourism.

The Commission stands ready to work with all member states to ensure that possible national support measures to tackle the outbreak of the COVID-19 virus can be put in place in a timely manner.

The Commission will propose to the Council to apply the full flexibility provided for in the EU fiscal framework so that they can implement the measures needed to contain the coronavirus outbreak and mitigate its negative socio-economic effects.

First, the Commission considers that the COVID-19 pandemic qualifies as an "unusual events outside the control of government". This allows accommodating exceptional spending to contain the COVID-19 outbreak such as healthcare expenditure and targeted relief measures for firms and workers.

Second, the Commission will recommend adjusting the fiscal efforts required from member states in case of negative growth or large drops in activity.

Finally, the Commission stands ready to propose to the Council to activate the general escape clause to accommodate a more general fiscal policy support. This clause would -- in cooperation with the Council -- suspend the fiscal adjustment recommended by the Council in case of a severe economic downturn in the euro area or the EU as a whole.

The Commission said it is working with member states to ensure the flow of essential goods across land borders.

To bring immediate relief to hard-hit SMEs, the EU budget will deploy its existing instruments to support these companies with liquidity, complementing measures taken at national level.

In the coming weeks, one billion euros will be redirected from the EU budget as a guarantee to the European Investment Fund to incentivize banks to provide liquidity to SMEs and midcaps.

"We need to protect workers from unemployment and loss of income to avoid permanent effect. The Commission stands ready to support member states in this, promoting, in particular short-time work schemes, upskilling and reskilling programs that have proven effective in the past," the Commission said.

The Commission will furthermore accelerate the preparation of the legislative proposal for a European Unemployment Reinsurance Scheme aiming at supporting member state policies that preserve jobs and skills.

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