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How Europe is Planning to Combat the COVID-19 Crisis?

How Europe is Planning to Combat the COVID-19 Crisis?

Like many economic superpowers such as the United States and China, the European economy has been adversely impacted by the coronavirus outbreak. Various authorities have enforced and are still enforcing policy measures and budgetary liquidity to bolster their health systems and enabling relief to the sectors that are greatly impacted. To alleviate the shock on the economy and livelihoods, the European Commission has espoused an extensive economic responsibility for the crisis, introducing flexibility in the fiscal rules of EU, amended its State Aid Rules and took a major Coronavirus Response Initiative in the form of investment worth 37 billion Euros to render liquidity to the health care sector and small businesses.

Additionally, the Commission also promised far-ranging measures to channel every penny of the EU budget to protect lives. Also, a new initiative was launched by the Commission called SURE-Support mitigating Unemployment Risks in Emergency for the purpose of supporting families through preserving jobs. It also included support to fishermen and farmers.

Let’s find out in detail as to how the government took up measures to maintain economic stability:

Flexibility in Fiscal Rules 

For the first time ever, the EC has triggered the general escape clause of the Stability and Growth Pact in order to rapidly and persuasively retaliate to the crisis of coronavirus in a systematic and timely manner. The budgetary rules have become flexible and relaxed.

Investment Initiative 

The European Commission has directed Corona Response Investment Initiative worth 37 billion euros towards small and medium enterprises, healthcare systems, labor markets and various other endangered parts of the economies. The refund obligations have been renounced and the investment funds are currently in the hands of Member States.

Strategic Funding

To alleviate the economic impact, the European Commission has initiated strategic funding by channelizing 400 million euros to uplift global preparedness and to contain and prevent the virus from spreading further inside as well as outside Europe. It has also decided to support the WHO.

Role Played by the European Investment Bank and the European Central Bank 

In mid-March, the European Investment Bank Group advanced a plan to utilize 40 billion euros for financing for the purpose of improving liquidity, bridging loans, working capital constraints for SMEs and credit holidays.

Two days after the announcement of the European Investment Bank, the governing council of the European Central Bank declared a new Pandemic Emergency Purchase Programme worth 750 billion euros which constitutes 7.3% of euro area GDP when added with already decided 120 billion Euros. This temporary program is made to control the novel situation, responsible for creating difficulty for the monetary union of Europe.

Relaxed State aid rules

To alleviate the economic blow and save businesses, the European Commission has come up with very flexible State Aid rules by far, giving permission to the Member States for directly supporting the small firms and the most vulnerable companies that could close down without any external support. Given below are the five types of aids that have been planned to ensure that businesses continue to operate without any disruption:

  • Direct tax advantages or grants of up to eight hundred thousand euros per company.
  • Subsidy at bank loans.
  • Lesser interest rates on private and public loans.
  • The prevailing lending capabilities of the bank would be used as a medium to support small and medium enterprises.
  • The state would be obliged to provide additional flexibility to facilitate short-term export credit insurance.

Conclusion

The Coronavirus pandemic is not only testing the healthcare systems but also coming forth with unprecedented challenges in front of the European economy, precisely on the economy of the entire world. To effectively deal with the current crisis, the respective authorities are doing their best and even preparing strategies to meet future challenges as the problem evolves. Hence, the European Commission is using all the possible tools to efficiently battle the outbreak due to Coronavirus.