COVID-19 Update 11 June 2020

News

This weekly news update summarizes and analyzes the latest developments and measures in light of the COVID-19 outbreak. This week in Brussels

European Central Bank increases firepower, calls for quick adoption Recovery Fund

On 4 June, the (ECB) announced it will increase the envelope for the pandemic emergency purchase program (PEPP) by €600 billion. Combined with the earlier €750 billion, the PEPP will amount to a total of €1,350 billion. Moreover, the program is extended by six months, until June 2021. The ECB believes the expansion of the program is needed as the Eurozone economy continues to shrink, and price indices drop to levels bordering deflation.

By stabilizing the financial markets through purchases of sovereign debt, the ECB is providing the monetary and hence indirectly economic response of the EU. By doing this, the ECB buys time for the European leaders to reach a political agreement on the right instruments for the economic recovery. ECB President Lagarde warned that a quick adoption of the EU Recovery Fund is needed, and stated that “any delay (of the adoption, red.) risks generating negative spillovers and driving up the costs, and hence the financing needs, of this crisis”.

Preparing for the budget negotiations

In anticipation of the first round of budget negotiations, scheduled for next week Friday, tension is rising in Brussels. Austrian Finance Minister Blümel said that the new proposal is not acceptable as Austria’s contribution to the MFF would increase by 50% and the Recovery Fund will have to be repaid as well. Dutch Foreign Minister Blok and Finance Minister Hoekstra sent their assessment of the Commission’s proposal to the Dutch parliament. The Netherlands considers a structural increase of the budget to be problematic and wants the budget to be modernized by linking funding to, for example, the rule of law and reforms. Finally, Finland stated that its opposition to a grant-based Recovery Fund remains unchanged. Next week’s negotiations will be exploratory in nature, a break-through is not expected yet. Initiatives at EU level

• The Organization for Economic Cooperation and Development (OECD) said on Wednesday that Spain, France, Italy and the UK will be confronted with the world’s most severe economic fallout due to COVID-19. The OECD predicts that the 2020 GDP of these countries will fall around 11%, compared to a global decline of 7.6%; • On 10 June, the Commission published a Communication on tackling disinformation during the COVID-19 crisis. The Commission emphasizes that disinformation from both within as well as outside the EU in times of a pandemic can be life threatening, and therefore all actors will have to work together to fight it. The EU previously already criticized Russia for spreading misinformation, but it now also accuses China of the same practices. Social media companies such as Facebook, Youtube and Twitter have been asked to publish monthly reports on how they are fighting misinformation; • On 5 June Ylva Johansson, Commissioner for Home Affairs, stated that the EU will fully reopen internal borders by the end of June and start lifting restrictions on travel to and from non-EU countries in July. High Representative of the Commission Josep Borrell reiterated on 10 June that the Commission intents to gradually open the external borders to third-country travelers. The Commission is currently consulting with Member States on the right approach;

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• Denmark, France, Germany, Spain, Belgium and Poland sent a letter to the Commission stated that “the present situation has raised questions about Europe’s preparedness for pandemics and underlined the need for a common European approach”. Furthermore, the Member States call for efficient monitoring and data sharing, coordination of supplies, research and innovation, a regulatory framework, global value and supply chains and production facilities; • On 9 June, the Council adopted conclusions on Shaping Europe’s Digital Future. Apart from the wide range of issues related to the implementation of the EU’s digital strategy, the conclusions highlight the positive impact of the digital transformation on the fight against COVID-19; • Mário Centeno, Portuguese Finance Minister and President of the , announced he will resign from government as of 13 July. Centeno will thus still chair the 11 June Eurogroup meeting but the Eurogroup will have to find a successor. Centeno guided the negotiations on the EU’s emergency support package of €540 billion but a new president will be leading future negotiations on the economic recovery of COVID-19. Potential candidates to succeed Centeno are Nadia Calviño, the Spanish vice-president for economy, and Pierre Gramegna, ’s finance minister; • The Commission announced it allocated nearly €166 million via the European Innovation Council Accelerator Pilot (previously SME instrument) to 36 companies combatting the COVID-19 pandemic. On top of that, over €148 million will be granted to another 36 companies set to contribute to the recovery plan of Europe. This brings up the total investment from Horizon 2020 to €314 million in this round; • The Commission approved several national support scheme under the Temporary Framework for state aid: o Cyprus set up a €33 million scheme that will allow the delayed payment of VAT by companies affected by COVID-19; o Finland announced its participation as a shareholder in the rights issue of Finnair on 10 June. With 55.8% of the shares, Finland is now Finnair’s largest shareholder. The total capital increase is expected to be around €500 million and Finland is expected to receive rights to subscribe for new shares in an amount of €286 million; o France set up a €5 billion “umbrella” scheme supporting COVID-19 relevant R&D projects, construction and upgrade of testing facilities and investments in production of COVID-19 relevant products and technologies; o Italy prolonged until end 2023 several support measures for maritime transport under Italy’s “International Registry” scheme; o Portugal will provide a €1.2 billion rescue loan to TAP Air Portugal.

National measures

• Austria announced that travelers from Croatia who traveled via Slovenia will no longer need to go into a 14-day quarantine as of 16 June. Slovenia also cancelled compulsory quarantine as it opened borders with all of its neighboring EU countries; • Greece decided to lift restrictive measures for Italian tourists, after Di Maio, Italian minister of foreign affairs, met with his counterpart Nikos Dendias.

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Next week

European Commission

• 17/06: Publication of White Paper on an Instrument on Foreign Subsidies.

Council of the EU

• 15/06: Video conference of foreign affairs ministers (agenda); • 15/06: Video conference of energy ministers (agenda); • 16/06: Video conference of ministers of European affairs (agenda).

European Parliament

• 15/06: Committee on the Internal Market and Consumer Protection (IMCO) (agenda); • 15/06: Committee on Employment and Social Affairs (EMPL) (agenda); • 15/06: Committee on Civil Liberties, Justice and Home Affairs (LIBE) (agenda); • 16/06: Committee on the Environment, Public Health and Food Safety (ENVI) (agenda); • 17-19/06: Plenary Session (agenda).

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