The European Commission has adopted a Communication providing member states with broad guidance on the conduct of fiscal policy in the period ahead. It provides guiding principles for the proper design and quality of fiscal measures. It sets out the Commission's considerations regarding the deactivation or continued activation of the general escape clause. It also provides general indications on the overall fiscal policy for the period ahead, including the implications of the Recovery and Resilience Facility (RRF) for fiscal policy.
The Commission is committed to ensuring a coordinated and consistent policy response to the current crisis. This requires credible fiscal policies that address the short-term consequences of the coronavirus pandemic and support the recovery, while not endangering fiscal sustainability in the medium-term. This Communication aims to support those objectives.
Guidance for co-ordinated fiscal policies
The coordination of national fiscal policies is essential to support the economic recovery. The Communication specifies that fiscal policy should remain agile and adjust to the evolving situation. It warns against a premature withdrawal of fiscal support, which should be maintained this year and next. It provides that once health risks diminish, fiscal measures should gradually pivot to more targeted and forward-looking measures that promote a resilient and sustainable recovery and that fiscal policies should take into account the impact of the RRF. Finally, fiscal policies should take into account the strength of the recovery and fiscal sustainability considerations.
This guidance will facilitate member states in the preparation of their stability and convergence programmes, which should be presented to the Commission in April 2021. The guidance will be further detailed in the Commission's European Semester spring package.
Considerations for the deactivation or continued activation of the general escape clause
The Commission proposed the activation of the general escape clause in March 2020 as part of its strategy to respond quickly, forcefully and in a coordinated manner to the coronavirus pandemic. It allowed Member States to undertake measures to deal adequately with the crisis, while departing from the budgetary requirements that would normally apply under the European fiscal framework.
The Communication sets out the Commission's considerations for how a future decision on the deactivation of the clause or its continued activation for 2022 should be taken. In the view of the Commission, the decision should be taken following an overall assessment of the state of the economy based on quantitative criteria. The level of economic activity in the EU or euro area compared to pre-crisis levels (end-2019) would be the key quantitative criterion for the Commission in making its overall assessment of the deactivation or continued application of the general escape clause. Therefore, current preliminary indications would suggest to continue applying the general escape clause in 2022 and to deactivate it as of 2023.
Following a dialogue between the Council and the Commission, the Commission will assess the deactivation or continued activation of the general escape clause on the basis of the 2021 Spring Forecast, which will be published in the first half of May.
Country-specific situations will continue to be taken into account after the deactivation of the general escape clause. In case a Member State has not recovered to the pre-crisis level of economic activity, all the flexibilities within the Stability and Growth Pact will be fully used, in particular when proposing fiscal policy guidance.
Making the best use of the Recovery and Resilience Facility
The Communication provides some general indications on Member States' fiscal policy in 2022 and over the medium-term, including the link with the funds of the RRF. The RRF will play a crucial role in helping Europe recover from the economic and social impact of the pandemic and will help to make the EU's economies and societies more resilient and secure the green and digital transitions.
The RRF will make €312.5 billion available in grants and up to €360 billion available in loans to Member States to support the implementation of reforms and investments. This will provide a sizeable fiscal impulse and help mitigate the risk of divergences in the euro area and the EU.
The implementation of the Recovery and Resilience Facility will also have important implications for national fiscal policies. Expenditure financed by grants from the RRF will provide a substantial boost to the economy in the coming years, without increasing national deficits and debt. It will also spur member states to improve the growth-friendliness of their fiscal policies. Public investment funded by RRF grants should come on top of existing levels of public investment. Only if the RRF finances additional productive and high quality investment, will it contribute to the recovery and lift potential growth, in particular when combined with structural reforms in line with the country-specific recommendations.
Member States should make best use of the unique window of opportunity provided by the RRF to support the economic recovery, foster higher potential growth and improve their underlying fiscal positions in the medium to long term.
Public debate on the economic governance framework
The crisis brought about by the coronavirus pandemic has highlighted the relevance and importance of many of the challenges that the Commission sought to discuss and address in the public debate on the economic governance framework. Relaunching the public consultation on the framework will allow the Commission to reflect on these challenges and draw lessons. The Communication confirms the Commission's intention to relaunch the public debate on the economic governance framework once the recovery takes hold.
An Economy that Works for People Executive Vice President Valdis Dombrovskis said: “There is hope on the horizon for the EU economy, but for now the pandemic continues to hurt people's livelihoods and the wider economy. To cushion this impact and to promote a resilient and sustainable recovery, our clear message is that fiscal support should continue as long as needed. Based on current indications, the general escape clause would remain active in 2022 and be deactivated in 2023. Member States should make the most of the Recovery and Resilience Facility, as this gives them a unique chance to support their economy without burdening public finances. Timely, temporary and targeted measures will allow a smooth return to sustainable budgets in the medium-term.”
Economy Commissioner Paolo Gentiloni said: “Our decision last March to activate the general escape clause was a recognition of the gravity of the unfolding crisis. It was also a statement of our determination to take all necessary steps to tackle the pandemic and support jobs and companies. One year on, the battle against COVID-19 is not yet won and we must ensure that we do not repeat the mistakes of a decade ago by pulling back support too soon. For 2022, it is clear that fiscal support will still be necessary: better to err towards doing too much rather than too little. At the same time, fiscal policies should be differentiated according to the pace of each country's recovery and their underlying fiscal situation. Crucially, as funding from Next Generation EU begins to flow, governments should ensure that national investment spending is preserved and strengthened through EU grants."
Questions and answers: Commission presents guidance on fiscal policy response to coronavirus pandemic
Therapeutics Strategy - First rolling review of a new COVID-19 medicine
The European Medicines Agency has today (7 May) started the rolling review of sotrovimab (VIR-7831), a monoclonal antibody developed for the treatment of COVID-19. The review follows hot on the heels of the EU COVID-19 Therapeutics Strategy presented yesterday and is a first step towards the Strategy's target of starting seven rolling reviews of COVID-19 therapeutics in 2021. The rolling review launched by EMA will assess sotrovimab's effectiveness in preventing hospitalization and death; safety and quality. A rolling review is quicker than a regular evaluation as data is reviewed as it comes in. Should the European Medicines Agency recommend authorising the treatment at the end of its review, the European Commission will move swiftly to authorize it.
The EU Therapeutics Strategy supports the development and availability of much needed COVID-19 therapeutics and covers the lifecycle of medicines: from research, development and manufacturing to procurement and deployment. It is part of the strong European Health Union, in which all EU countries prepare and respond together to health crises and ensure the availability of affordable and innovative medical supplies – including the therapeutics needed to treat COVID-19. More details on the EU Therapeutics Strategy are available in a press release and factsheet.
Kazakhstan to deliver humanitarian assistance to India
Kazakhstan will provide humanitarian assistance to India due to the sharp deterioration of the epidemiological situation in this country, reported the Akorda Press, writes Zhanna Shayakhmetova.
This was announced at the meeting of Kazakh President Kassym-Jomart Tokayev and Prime Minister Askar Mamin on May 7.
President Tokayev instructed the government to dispatch 6 million medical masks, 400,000 respirators, 50,000 anti-plague suits, and 105 portable artificial lung ventilation devices made in Kazakhstan.
India observed a record daily rise in coronavirus cases on Friday, bringing total new cases for the week to 1.57 million, according to Reuters.
India is now the second most corona-affected country with the overall cases standing at 21.49 million.
On May 4, Tokayev delivered a message to Indian Prime Minister Narendra Modi to express “deep solidarity with the Indian nation over the devastating COVID-19 surge in their country.”
The President noted that Kazakhstan is ready “to unite efforts with our Indian friends to contain the spread of the pandemic and provide every possible assistance in the spirit of enduring friendship and mutual support between our states.”
Earlier, it was reported that Kazakhstan will provide humanitarian aid that consists of 10,000 tons of flour to Kyrgyzstan.
“Guided by the principles of friendship, alliance and strategic partnership with Kyrgyzstan, President Kassym-Jomart Tokayev decided to provide humanitarian assistance to the fraternal Kyrgyz people on behalf of the Kazakh people,” President’s spokesperson Berik Uali wrote on his Facebook on May 6.
India: EU mobilizes an initial €2.2 million in emergency funding for the vulnerable during COVID-19
The Commission has announced that it will allocate an initial €2.2 million in emergency funding to respond to the drastic surge in COVID-19 cases in India. The funding will support the World Health Organization (WHO) for a 6-month case management of COVID-19 patients, as well as strengthening laboratory capacity for COVID-19 testing. Crisis Management Commissioner Janez Lenarčič said: “We are providing additional EU support towards the fight against COVID-19 in India. This comes on top of the generous and swift assistance from EU member states that stepped up as part of Team Europe to offer critical supplies of oxygen, ventilators and medicines over the last few days. We stand ready to work with the WHO and other partners on the ground to jointly fight this battle at this difficult time – we are stronger together.”
Member states have already mobilized supplies of urgently needed oxygen, ventilators and medicines from Austria, Belgium, Czechia, Denmark, Finland, France, Germany, Ireland, Italy, Luxembourg, Netherlands, Portugal, Romania, Spain and Sweden to India over the last week via the EU Civil Protection Mechanism.
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