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#Coronavirus - Centeno says the Single Market is at stake

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Eurogroup President Mario Centeno (pictured) addressed the European Parliament’s economic and monetary affairs committee on 21 April, updating MEPs on the unprecedented measures taken to help Europe’s economy during the pandemic.

The EU has agreed to maximum fiscal and state aid flexibility, this has allowed countries to support their workers and businesses with the aim of reducing the economic destruction caused by the lockdown.

From ‘whatever it takes’ to ‘whatever you can’

Centeno said that the ability to respond to the crisis is fragmented, the ability of one state to intervene in its economy could be much greater than in another. Discretionary fiscal responses amount to 3% GDP on average and liquidity support through warranties and deferred tax payments worth 16% GDP. This amounts to €3 trillion. However, Centeno said that national responses were constrained and uneven across the EU. Germany, for example, has been able to make seven times the fiscal response of Italy despite the fact that the pandemic has hit Italy much harder. 

Moving from a 'whatever it takes' to a 'whatever you [referring to states] can' approach to recovery will result in uneven treatment of citizens and companies - removing the so-called level-playing field. Centeno argues that this requires a strong component of solidarity for this external shock that was beyond any state's control. 

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Recovery Fund

Centeno said that more would be needed, in particular, the need for a dedicated recovery fund. He said this needs to be sizeable and will be in line with the EU’s objectives. There are differences of views between member states on how this should be funded, especially on the issue of debt mutualization.

Beyond financing, he is looking at how the money could best be spent. Centeno thinks there is a strong case for a budgetary instrument for convergence and competitiveness (BICC). 

In October 2019 the Eurogroup agreed in principle on the BICC, while a number of aspects needed further clarification. The BICC would be run by the Commission, under the guidance of the member states. The strategic priorities will be set in the framework of the Euro Area Recommendations, and states would submit proposals of packages of reforms and investment as part of the European Semester. Projects eligible for financing through the BICC will be chosen among them. The BICC would need to greatly exceed the €12.9 billion considered last year. In the Commission's proposal, it is foreseen to add an enabling clause, allowing member states to provide additional finance. For this, an intergovernmental agreement would be needed.

Centeno noted the call of the European Parliament for an increase to the EU Budget and for recover bonds guaranteed by the EU budget and focused on future investment.

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