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EU ministers need to broker a solution for Europe's economy that addresses scale and urgency of #coronavirus impact

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Today (7 April) is a crucial day with Eurogroup leaders meeting to discuss the joint economic response to the crisis caused by the Coronavirus pandemic. On 26 March, heads of government, unable to reach agreement passed the buck to their finance ministers and the Eurogroup to come up with a solution, writes Catherine Feore.

Clashing editorials over the weekend with conflicting positions show how far apart the different countries remain, with the European Commission trying to bridge this divide through its own proposal.

Internal Market Commissioner Thierry Breton and Economy Commissioner Paolo Gentiloni (former Italian prime minister) published a joint op-ed in Le Monde and Frankfurter Allgemeine Zeitung, the leading French and German newspaperswhere they call on the 27 EU member states to demonstrate their solidarity by creating a European tax-funded fund capable of issuing long-term bonds. 

Breton and Gentiloni want their idea to be complementary to the President of the European Commission Ursula von der Leyen’s plan to make full use of the EU budget for 2021-2027, with the aim of reviving the economy after the crisis. As useful as the EU budget may be it is thought to be nowhere near the necessary scale to address the sharp economic downturn and the prolonged impact of the pandemic

Yesterday, in an interview with Brussels think-tank Bruegel. Gentiloni said he was not proposing the mutualization of debt, but the mutualization of programmes and missions for the next months and yearsHe said that the old discussions were negative and that the EU needed to look forwards. 

Gentiloni said that it was clearly distinct from a new Marshall Plan, in that Europe would have to come to its own assistance and that the Marshall plan proposed in 1947 was not introduced fast enough at the end of the war.  It is unclear how this will overcome the concerns of a country like the Netherlands where there are strong objections not just to debt mutualization, but also to the current – very modest – EU budgetary proposals.

Gentiloni and Breton are proposing a “fourth pillar" in addition to the other three: The European Stability Mechanism aid fund, the European Investment Bank and the recently proposed joint support for partial unemployment plans in EU member states.

Eight European countries, including France, Italy, Spain, Luxembourg and Ireland have recently called on Europe to consider some sort of debt mutualization. French President Emmanuel Macron has said that if a minimum of solidarity will not be shown to the countries in need "then we accept that Europe has no common destiny". Also, Italian Prime Minister Giuseppe Conte has described Coronabonds as "European recovery bonds", which he considers to be necessary to "finance the extraordinary efforts that Europe will have to make to rebuild its economic and social tissue.”

Over the weekend the Spanish prime minister indicated that while Spain wanted to see mutualization, ‘Spain was also a pragmatic country’.

Debt mutualization, in the form of a euro/corona/solidarity bonds, is firmly rejected by Germany, the Netherlands and other countries, who took the same position in the course of the 2008 financial crisis. 

At the same time German Foreign and Finance Ministers Heiko Maas and Olaf Scholz have also penned an editorial which has been published in several European publications in France, Italy, Spain, Portugal and Greece. These leading German politicians from the right (CDU) and left (SPD) says that the German government will support a European crisis response package based on the framework of the European Stability Mechanism, but which does not include the establishment of new European troika-like crippling conditionality, but which draws the line at the issuance of bonds. This would make us of the Enhanced Conditions Credit Line (ECCL) available and proposed last week by Klaus Regling, director of the ESM.

In parallel, in yet another editorial, the President of the French National Assembly, Richard Ferrand, and the President of the German Bundestag, Wolfgang Schäuble - known for his intransigence to the plight of Greece during the financial crisis - call for "more solidarity and financial integration [in Europe] ...We can and must mobilize and extend with all the necessary flexibility the European budget and the multiannual financial framework (MFF) and the whole structural, regional and social funds", as well as the European Investment Bank and the European Mechanism. for stability, wrote the two leaders of the parliamentarians in Paris and Berlin. This proposal appears to be more in line with that being proposed by Gentiloni and Breton.

An agreement may not be fully hammered out today, but the are chinks of light. Leaders need to recognise the scale of the problem, the need for trust and the recognition that it is not only in their common interest but in every country’s self-interest to find a common solution that meets the scale of this challenge. 

Finally, leaders from north and south should reflect on the impact and the motivations of the Marshall Plan, it was not just an act of charity, the United States also needed to help its own economy, it also recognized that the need for political stability in Europe. Those two objectives are as relevant today as they were in 1947. Germany and the Netherlands will also suffer if the economy of Europe as a whole is weak, divisions will grow and the European project may not be done, but there is a growing and real threat from populists to the sort of Europe, the European Union represents.

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Commission approves German scheme to compensate accommodation providers in the field of child and youth education for damages suffered due to the coronavirus outbreak

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The European Commission approved, under EU state aid rules, a German scheme to compensate accommodation providers for child and youth education for the loss of revenue caused by the coronavirus outbreak. The public support will take the form of direct grants. The scheme will compensate up to 60% of the loss of revenues incurred by eligible beneficiaries in the period between the beginning of the lockdown (which started on different dates across the regional states) and 31 July 2020 when their accommodation facilities had to be closed due to the restrictive measures implemented in Germany.

When calculating the loss of revenue, any reductions in costs resulting from income generated during the lockdown and any possible financial aid granted or actually paid out by the state (and in particular granted under scheme SA.58464) or third parties to cope with the consequences of the coronavirus outbreak will be deducted. At the central government level, facilities eligible to apply will have at their disposal a budget of up to €75 million.

However, these funds are not earmarked exclusively for this scheme. In addition, regional authorities (at Länder or local level) may also make use of this scheme from the local budgets. In any event, the scheme ensures that the same eligible costs cannot be compensated twice by different administrative levels. The Commission assessed the measure under Article 107(2)(b) of the Treaty on the Functioning of the European Union, which enables the Commission to approve state aid measures granted by member states to compensate specific companies or specific sectors for the damages caused by exceptional occurrences, such as the coronavirus outbreak.

The Commission found that the German scheme will compensate damages that are directly linked to the coronavirus outbreak. It also found that the measure is proportionate, as the envisaged compensation does not exceed what is necessary to make good the damages. The Commission therefore concluded that the scheme is in line with EU state aid rules.

More information on actions taken by the Commission to address the economic impact of the coronavirus pandemic can be found here. The non-confidential version of the decision will be made available under the case number SA.59228 in the state aid register on the Commission's competition website.

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Commission approves Austrian measures to support rail freight and passenger operators affected by the coronavirus outbreak

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The European Commission has approved, under EU state aid rules, two Austrian measures supporting the rail freight sector and one measure supporting the rail passenger sector in the context of the coronavirus outbreak. The two measures supporting the rail freight sector will ensure increased public support to further encourage the shift of freight traffic from road to rail, and the third measure introduces temporary relief for rail operators providing passenger services on a commercial basis.

The Commission found that the measures are beneficial for the environment and for mobility as they support rail transport, which is less polluting than road transport, while also decreasing road congestion. The Commission also found that the measures are proportionate and necessary to achieve the objective pursued, namely to support the modal shift from road to rail whilst not leading to undue competition distortions. Finally, the waiver of infrastructure access charges provided for in the second and third measures described above is in line with the recently adopted Regulation (EU) 2020/1429.

This Regulation allows and encourages member states to temporarily authorize the reduction, waiver or deferral of charges for accessing rail infrastructure below direct costs. As a result, the Commission concluded that the measures comply with EU state aid rules, in particular the 2008 Commission Guidelines on state aid for railway undertakings (the Railway Guidelines).

Executive Vice President Margrethe Vestager, in charge of competition policy, said: “The measures approved today will enable the Austrian authorities to support not only rail freight transport operators, but also commercial passenger operators in the context of the coronavirus outbreak. This will contribute to maintaining their competitiveness compared to other modes of transport, in line with the EU Green Deal objective. We continue working with all member states to ensure that national support measures can be put in place as quickly and effectively as possible, in line with EU rules.”

The full press release is available online

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Commission approves €5.5 million Estonian scheme to support companies active in tourism sector affected by coronavirus outbreak

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The European Commission has approved a €5.5 million Estonian scheme to support companies active in the tourism sector affected by the coronavirus outbreak. The measure was approved under the State aid Temporary Framework. The public support will take the form of direct grants and will be open to accommodation providers, travel agencies, tourism attraction operators, tourism service providers, international coach service providers, conference organizers and tourist guides.

The purpose of the measure is to mitigate the sudden liquidity shortages that these companies are facing because of the restrictive measures imposed by the government to limit the spread of the virus. The Commission found that the Estonian measure is in line with the conditions set out in the Temporary Framework. In particular, the support (i) will not exceed €800,000 per company; and (ii) will be granted no later than 30 June 2021.

The Commission concluded that the measure is necessary, appropriate and proportionate to remedy a serious disturbance in the economy of a member state, in line with Article 107(3)(b) TFEU and the conditions of the Temporary Framework. On this basis, the Commission approved the measure under EU state aid rules. More information on the Temporary Framework and other actions taken by the Commission to address the economic impact of the coronavirus pandemic can be found here.

The non-confidential version of the decision will be made available under the case number SA.59338 in the state aid register on the Commission's competition website once any confidentiality issues have been resolved. 

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