How has the EU responded to the impact of the Corona-crisis?
The outbreak of the coronavirus in China at the end of 2019, and its spread across Europe and the rest of the world from February 2020 onwards, started out as a health crisis before evolving in a more general crisis touching on all segments of public life. Virtually all economic sectors partly grounded to a halt, businesses were sometimes forced to close their doors, people were losing their jobs, countries had closed their borders and air traffic had come to a virtual standstill.
Between spring 2020 and 2022, EU member states gradually relaxed economic and social restrictions and later tightened them up again. With the increase in vaccination rates in the EU, travel to other European countries was largely possible again as from summer 2021 and the measures were scaled down further as from February 2022. The European Commission’s policy to overcome the COVID-19 crisis will be continued for the time being (see below).
This page lists the main financial measures taken by the EU to support the healthcare system and the economy. For information on policy in general, we refer you to the COVID-19-sites launched by the European Commission and the European Council.
Financial measures taken by the EU to support the healthcare sector
The EU has taken the following measures to support the healthcare sector.
- Acting on a proposal from the European Commission, the Council of the European Union and the European Parliament agreed to activate an Emergency Support Instrument (ESI). This allows the Commission, among other things, free up resources for the rescEU initiative, which involves building up a strategic stock of vital medical equipment – and distributing it if necessary. The funding for the two instruments stands at just over € 3 billion, a sum allocated from the EU budget. The EU member states together will be required to contribute an extra € 3 billion to the EU budget.
Approximately €1 billion has been released from the EU Horizon 2020 research and innovation fund to combat the COVID-19 pandemic and a further € 152 million had been pledged. Click here for more information.
- On behalf of the EU, the European Commission’s Joint Negotiation Team (consisting of the Commission, France, Germany, Italy, Netherlands, Poland, Spain and Sweden) negotiated with vaccine developers and signed 6 procurement contracts in the course of 2020 for a total of nearly 2 billion doses. The Commission is providing about € 2.7 billion in support from the Emergency Support Instrument. In total, the EU will have procured over 4.5 billion doses by the end of 2022. Click here for more information.
In addition to the above measures, the EU also supported the healthcare sector in member states by issuing medical guidelines, and helps member states to obtain personal protective equipment for their healthcare workers.
Economic support for EU member states
On 27 May 2020 the European Commissions presented its proposal for a € 750 billion recovery fund, named Next Generation EU, together with new proposals for the multiannual financial framework 2021-2027 for the EU.
On 21 July 2020 the European Council, which is made up of heads of state or government of the EU member states, reached a political agreement on an adjusted recovery package. The European Commission will be authorized to lend up to € 750 billion on the capital market. Up to € 360 billion can be used for loans to member states and up to € 390 billion can be used for grants for member states: ‘The European Commission has to repay the loans between 2028 and 2058'.
- More information on the package is available here.
Agreement was reached on the Recovery and Resilience Facility on 18 December 2020. This facility is at the heart of Next Generation EU. It will make € 672.5 billion available in loans and grants to support reforms and investments in EU member states. To be eligible for the support member states are obliged to draft a recovery plan describing the planned investments and economic reforms. The reforms and investments will have to be completed on December 31 of 2026. All member states have submitted a plan. The Netherlands submitted its plan on the 8 July 2022 and was the last member state to do so. The plan can be accessed here.
On 9 April 2020, European finance ministers reached agreement on a € 540 billion financial support package for countries hit most severely by the COVID-19 crisis. The package consists of the following components:
- € 240 billion from the European Stability Mechanism (ESM) emergency fund;
- € 200 billion in company credit distributed by the European Investment Bank (EIB);
- € 100 billion for a new temporary instrument known as Support to mitigate Unemployment Risks in an Emergency (SURE). By spring 2021 the Council had agreed to award more than €94 billion in soft loans to 19 member states, and nearly €92 billion had been disbursed until May 2022.
Click here for a full list of the components of the support package. The European Council, which is made up of heads of state or government of the EU member states, adopted the financial assistance package on 23 April 2020.
On 13 March 2020, the European Commission proposed a Corona Response Investment Initiative (CRII). A total of € 37 billion in non-utilised resources from the European Structural and Investment (ESI) Funds will be used for COVID-19-related support for the healthcare sector, small and medium-sized enterprises (SMEs), vulnerable sectors and the labour market. On 2 April 2020 this initiative was followed up by an additional CRII+ package.
Within NextGenerationEU, the CRII and CRII+ hare part of the Recovery Assistance for Cohesion and the Territories of Europe (REACT-EU), for which €47.5 billion is available for 2021 and 2022 via the ESIF, to be applied for a green and digital economic recovery. Click here for more information.
Measures for offering EU member states more financial leeway
EU member states are bound by European fiscal rules governing their national budgets. The Stability and Growth Pact (SGP) sets limits on the budget deficits (3% of GDP) and government debt (60% of GDP) of EU member states, and states how any countries that deviate from these limits must set about achieving them.
Acting on a proposal from the European Commission dated 20 March 2020, the Council of the European Union and the European Parliament agreed to activate the SGP’s general escape clause. This allows EU member states to take all the financial measures that they feel are needed at a national level in order to kickstart the economy without violating the rules of the Stability and Growth pact. In March 2021 the European Commission made a proposal to continue applying the general escape clause to 2022 and to de-activate it in 2023. On 23 May 2022, however, the European Commission decided, partly in view of the uncertainty caused by the war in Ukraine, to de-activate the general escape clause in 2024.
On 26 March 2020, the European Central Bank (ECB) launched its Pandemic Emergency Purchase Programme (PEPP), under which up to € 750 billion worth of private and public sector securities could be purchased under the ECB’s responsibility. The initial purchase envelope was increased by € 600 billion on 4 June 2020 and by a further € 500 billion on 10 December for a new total of € 1,850 billion. Not only will the programme make it less expensive for member states to raise capital, governments will also be able to support companies and households that have run into difficulties due to the COVID-19 crisis. At the end of May 2022, more than €1,700 billion in public sector securities issued by EU member states had been purchased, including over €85 billion in Dutch government debt. The ECB de-activated the programme at the end of March 2022.
- More information is available here.
Temporary adjustment of EU rules on state aid
In order to prevent unfair competition, EU rules forbid governments in principle from providing state aid to the corporate sector.
In exceptional cases, the European Commission may give its consent to the provision of state aid subject to certain stringent conditions. The European Commission considers the COVID-19 crisis to be an exceptional situation, and, in response, has prepared a temporary policies to support the economies of EU member states. The policy is set out in the Temporary Framework for state aid measures to support the economy in the current COVID-19 outbreak. The Temporary Framework has since been amended on 6 occasions.
All EU member states must ask the European Commission for permission to provide temporary state aid during the current COVID-19 crisis.
This temporarily state aid regime will end on 30 June 2022. On 22 April 2020, the European Commission approved a Dutch loan guarantee scheme of up to €10 billion to support the Dutch economy. On 13 July 2020 the European Commission approved a Dutch proposal for a grant of €3.4 billion to KLM. In May 2021 the European Court of Justice ruled that the European Commission had provided inadequate reasons for its decision and ordered it to make a new decision. The Commission again approved the support provided to KLM on 19 July 2021.
The European Commission has approved proposals for all EU member states in the context of the new, temporary state aid regime. The total amount involved by the beginning of May 2021 was approximately already € 3,000 billion (Source: calculation by the Netherlands Court of Audit). A list of all proposals approved as at 18 October 2021 is available here.
Examples of other EU measures
In addition to measures aimed at the healthcare system and the economy, the EU imposed a tempory restriction with effect from 30 March 2020 to 15 June 2020 on all non-essential travel to and from the EU. The European Commission has also suspended airport slot requirements. Under the EU regulations on airport slots, airlines are obliged to use at least 80% of their take-off and landing slots during the course of the year in order to retain them in the following year. Due to the drastic drop in air travel, airlines cannot possibly achieve the required 80% during the Covid-19 crisis. On 16 December 2020, the European Commission submitted a proposal obliging airlines to utilise at least 40% of the slots allocated to them if they wish to retain their rights. This was later adjusted to 50% for the period from 28 March 2021 to 20 October 2021. The same percentage will then apply to 29 October 2022.
On 5 May 2020, the Council of the EU decided to adopt a European Commission proposal of 22 April 2020 to provide a € 3 billion macro-financial assistance package to ten enlargement and neighbourhood partners (including a number of Central and Eastern European countries, and Middle Eastern countries), in order to help them in their efforts to combat COVID-19. Between April 2020 and April 2021, the EU, its member states and the European financial institutions released a total of € 46 billion to help the EU’s partner countries mitigate the socioeconomic consequences of the pandemic.
What impact do these EU measures have on the work of the Netherlands Court of Audit and the European Court of Auditors?
The Netherlands Court of Audit monitors and audits the Dutch central government and its associated institutions. The power to audit EU resources directly invested in member states lies with the European Court of Auditors (ECA). If EU resources are spent in the Netherlands, the Netherlands Court of Audit also has audit powers in virtually all cases.
In a publication of 9 December 2020, the ECA wrote that the measures the EU had taken to counter the economic consequences of the COVID-19 crisis had helped to save jobs and businesses. However, it also pointed out the risk that various impacts of the COVID-19 crisis on EU member states could widen the economic gap between the countries. On 18 January 2021, the ECA highlighted the challenges faced by the EU in its support to member states’ public health response to COVID-19, such as setting an appropriate framework for cross-border health threats, facilitating the provision of appropriate supplies in a crisis and supporting the development of vaccines.
The 2008 financial crisis showed that European measures may affect the ability of supreme audit institutions to continue to perform independent audits. This may be relevant to audits of the use of resources from the ESM emergency fund, and also to audits of the easing of capital requirements for banks in the euro area. We recently published a blog about the ESM entitled “The ESM and the importance of independent audits.”
We have published a blog on the banking union entitled “European banking union shuts the doors to audit offices”.