Covid-19: what are the measures taken at the European Union level?

All the versions of this article: [English] [Español] [français]

The European Union has taken several steps to respond to the coronavirus crisis. On 23 March, it announced a relaxation of the rules for balancing the budget (European semester) and a temporary modification for state aid within the framework of the Single Market. On 23 April, the European Council also adopted an extraordinary financial support package (ESM, SURE, EIB) and mandated the European Commission to propose a European Recovery Fund linked to the Union’s ordinary budget (2021-2027).

6 May 2020

The first institution to react was the European Central Bank, which took several measures to calm the financial markets and offer facilities to states (and banks!). On the other hand, its action is framed by the treaties and the political balance of power between the member states, so it will not go as far as its American and British sisters to finance the deficits of the member states.

Here are some details on the most important measures and the questions they raise.

State aid: for whom and under what conditions?

As in 2008, European states have more room for manoeuvre to financially support their companies. The Commission has accounted for almost €2,500 billion of state aid to companies and sectors in difficulty. But there are major differences between countries, depending in particular on their budgetary capacity (Germany accounts for half of this amount). The EU checks national support schemes according to the rules of the new "temporary framework".

State aid is an important issue at the national level; for governments, it means the possibility of entering into the capital of a given company, defining its priorities or at least requiring social and environmental conditions for the companies receiving aid. It is an issue that concerns all enterprises: from the smallest enterprises to the largest multinationals, including public or semi-public enterprises.

Balancing the budget

The European institutions have activated a safeguard clause in the Treaties which allows Member States to deviate from the objectives of reducing their budget deficits and public debt. The Commission thus takes note of the large deficits that member states will have to bear as a result of the Covid-19 crisis.

The return to "normal" will be the subject of difficult negotiations between the main states and the European institutions because the Union does not envisage changing these rules in the long term
The European Council also approved a support mechanism for the member states with three main instruments:
- The activation of the European Stability Mechanism (ESM), which will be able to lend to states up to 2% of their GDP on more favourable terms than the market for expenditure related to the coronavirus crisis (€240 billion).
- European support for national economic unemployment schemes (SURE - €100 billion)
- And loans/guarantees from the European Investment Bank (€200 billion)

These instruments are not activated unconditionally. In addition to these major instruments, the Union has proposed other economic measures.

Finally, the Commission has adopted a "banking package" which relaxes the regulations in this area.

What about the future?

On 27 March, the European Commission presented a proposal for a recovery plan linked to the multi-annual budget for 2021-2027. This plan takes up the main elements of the Franco-German proposal, notably the possibility for the European Union to borrow on financial markets, leading de facto to a debt pooling.

The bulk of the 750 billion euros announced (540 million, of which 310 million in "grants" and 250 million in loans) will be distributed over the European Semester, thus enabling the Union to supervise national "green" and "digital" investments.

Discussions between member states will take place in the coming weeks, with the aim of implementing the plan by 1 January 2021. A little late for those who are now suffering the consequences of the pandemic...

The proposal to undertake an ecological transformation of the EU through the Green Deal seems to be seen as the "New Social Deal"; it would be the path to growth and renewed prosperity. In practice, it is still unclear what this catch-all word will actually mean. But what is certain is that the lobbies are already active...

The European Commission announced a Social Summit on the work of platforms in the third half of this year and published a study on the working conditions of platform workers in mid-March. In parallel, the European Parliament has started drafting an own-initiative report (non-binding, giving the EP’s position on a given issue)) on the subject. The aim of this process is to rapidly lead to a potentially legislative text, presented by the Commission, presenting a minimum social floor for platform workers. To be continued...

On the other hand, the coronavirus crisis does not seem to have changed the framework of EU trade policy. The Commission is continuing negotiations for trade agreements with Mexico, New Zealand and Mercosur (Argentina, Brazil, Paraguay, Uruguay) in particular. In this area, it is business as usual, as if the breaks in production chains, particularly for basic necessities (masks, fans), had not occurred.

Temporary Conclusions

The EU is emerging weakened from three months of crisis. Its lack of support for member countries in difficulty, particularly Italy and Spain, has further damaged the image of the Union among the people of Europe.

Despite the communication on the scale of the resources made available (€3,400 billion), it should be noted that these are mainly 1) national resources that have been mobilised 2) support in the form of loans (to be repaid) 3) resources based on existing funds (ESM, EIB) or bank loans.

For those countries that wanted a greater pooling of national resources (via Eurobonds in particular), this is yet another defeat. Orthodoxy and the "every man for himself" approach remain the main thrust of European policy, accentuating economic disparities within the bloc even further. But the issue of resource transfers is likely to come back in force during the next and likely euro crisis, plagued by even larger national deficits than before.

For social movements, there is room for manoeuvre to demand:
- (re)financing public services commensurate with needs and challenges, starting with health services;
- state takeover of key sectors of the economy to guide ecological transformation and relocation of production.

Pressure is needed at two levels: at the national level where public services are anchored, but also at the European level which sets the general framework for what can be spent. Indeed, each level of power must avoid blaming the other in order to avoid making the necessary reforms.

More broadly, and at the European level, we must find ways to defend our positions on a genuine ecological and social transition to counterbalance the "green neoliberalism" that the European institutions are already promising us.