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EU response lessens COVID-19 economic blow

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Had the EU institutions not intervened during the COVID-19 pandemic, the bloc’s economy would have seen much worse, says the World Bank report, writes Cristian Gherasim.

The report titled Inclusive growth at crossroads pointed to the governments of member states as much as to the EU institutions stepping in to dampen the impact of COVID-19 restrictions on the very poor. The economic response meant that the most serious effects of the pandemic on employment and income were avoided.

According to the World Bank document, the pandemic exposed and increased deep inequalities, halting progress in multiple areas, including gender equality and revenue convergence in all EU member states. Today, it is estimated that between three and five million people in the EU are "at risk of poverty" on the basis of national value thresholds compared to pre-crisis levels.

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“A green, digital and inclusive transition is possible if economic policy is increasingly geared towards reforms and investment in education, health and sustainable infrastructure,” said Gallina A. Vincelette, director for the European Union Countries at the World Bank.

The report shows that some of the economic support systems in place can help with ongoing reforms happening across the European Union. There is also need for a continued approach with government support schemes and vaccination key to the strengthening of companies, employees and households.

As we seen across Europe, given the fact that the pandemic isn’t over, governments respond to the prolonged crisis by continuing to offer state aid even throughout 2021.

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Yet, regardless of the response, the COVID-19 pandemic triggered EU's strongest peace recession since World War II, with an economic contraction of 6,1% in 2020.

The World Bank report calls for governments to make sure that sound and well-thought policies are in place as well as active labor market policies to support an inclusive recovery. The report stresses that special attention should be given to vulnerable pre-pandemic workers, such as young people, and the self-employed. These groups are more vulnerable to adjustments in employment in times of crisis and may face longer periods of unemployment or periods when they are out of work and lacking a source of income.

A particular attention in the report is given to women who have been disproportionately impacted by the COVID-19 crisis. The report found that at least one in five women will have difficulty returning to work, compared to one in ten men.

The hardest hit areas of the EU by the pandemic’s economic fallout have been the emerging economies. In the case of Romania, the World Bank report shows that the number of people at risk of poverty increased significantly at the beginning of the pandemic, as a result of the substantial decrease in incomes in the first wave of the pandemic.

In emerging economies, despite rapid introduction of government support measures combined with job adjustment policies contributing to moderating poverty levels, the poverty rates are still expected to remain above pre-crisis levels.

The World Bank's Global Economic Outlook report suggests that we will have strong but uneven growth in 2021. The global economy will grow by 5.6% - the strongest post-recession rate in 80 years. The outcome largely reflects a strong recovery in some large economies, yet sluggish in others.

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Commission approves €1.8 million Latvian scheme to support cattle farmers affected by the coronavirus outbreak

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The European Commission has approved a €1.8 million Latvian scheme to support farmers active in the cattle-breeding sector affected by the coronavirus outbreak. The scheme was approved under the State Aid Temporary Framework. Under the scheme, the aid will take the form of direct grants. The measure aims at mitigating the liquidity shortages that the beneficiaries are facing and at addressing part of the losses they incurred due to the coronavirus outbreak and the restrictive measures that the Latvian government had to implement to limit the spread of the virus. The Commission found that the scheme is in line with the conditions of the Temporary Framework.

In particular, the aid (i) will not exceed €225,000 per beneficiary; and (ii) will be granted no later than 31 December 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 set out in the Temporary Framework. On this basis, the Commission approved the scheme 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.64541 in the state aid register on the Commission's competition website once any confidentiality issues have been resolved.

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Commission approves €500,000 Portuguese scheme to further support the passenger transport sector in Azores in the context of the coronavirus outbreak

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The European Commission has approved a €500,000 Portuguese scheme to further support the passenger transport sector in the Region of the Azores in the context of the coronavirus outbreak. The measure was approved under the State Aid Temporary Framework. It follows another Portuguese scheme to support the passenger transport sector in Azores that the Commission approved on 4 June 2021 (SA.63010). Under the new scheme, the aid will take the form of direct grants. The measure will be open to collective passenger transport companies of all sizes active in the Azores. The purpose of the measure is to mitigate the sudden liquidity shortages that these companies are facing and to address losses incurred over 2021 due to the coronavirus outbreak and the restrictive measures that the government had to implement to limit the spread of the virus.

The Commission found that the Portuguese scheme is in line with the conditions set out in the Temporary Framework. In particular, the aid (i) will not exceed €1.8 million per company; and (ii) will be granted no later than 31 December 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.64599 in the state aid register on the Commission's competition website once any confidentiality issues have been resolved.

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Commission authorizes French aid scheme of €3 billion to support, through loans and equity investments, companies affected by the coronavirus pandemic

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The European Commission has cleared, under EU state aid rules, France's plans to set up a € 3 billion fund that will invest through debt instruments and equity and hybrid instruments in companies affected by the pandemic. The measure was authorized under the Temporary State Aid Framework. The scheme will be implemented through a fund, titled 'Transition Fund for Businesses Affected by the COVID-19 Pandemic', with a budget of € 3bn.

Under this scheme, support will take the form of (i) subordinated or participating loans; and (ii) recapitalization measures, in particular hybrid capital instruments and non-voting preferred shares. The measure is open to companies established in France and present in all sectors (except the financial sector), which were viable before the coronavirus pandemic and which have demonstrated the long-term viability of their economic model. Between 50 and 100 companies are expected to benefit from this scheme. The Commission considered that the measures complied with the conditions set out in the temporary framework.

The Commission concluded that the measure was necessary, appropriate and proportionate to remedy a serious disturbance in the economy of France, in accordance with Article 107 (3) (b) TFEU and the conditions set out in the temporary supervision. On this basis, the Commission authorized these schemes under EU state aid rules.

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Executive Vice President Margrethe Vestager (pictured), competition policy, said: “This €3bn recapitalization scheme will allow France to support companies affected by the coronavirus pandemic by facilitating their access funding in these difficult times. We continue to work closely with member states to find practical solutions to mitigate the economic impact of the coronavirus pandemic while respecting EU regulations.”

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