At Cambre, we are following the EU developments around COVID-19 closely as well as through our flagship series #BrusselsCalling. If you missed our last discussion with top journalists from all over Europe covering the crisis, you can still get the highlights. In this issue: The EU begins re-opening borders and issues guidelines on tourism, Commission recovery plan is in sight, New recapitalisation rules for companies proposed.
Breaking news: EU Prepares an Ease on Restrictions
Opening borders: The Commission has issued guidelines on restoring freedom of movement and lifting internal border controls. According to the guidelines, opening internal borders was crucial for economic recovery and restarting the single market. Criteria for the assessment of border restrictions and openings depend on the epidemiological situation in the Member States, the necessity to implement ongoing containment measures, and a weighting of costs and benefits of restrictions versus social and economic costs. Openings should be first considered between areas that face a similar epidemiological situation, but which are assessed as stable. Containment measures, such as physical distancing, should remain in place, but blanket restrictions on movement should be replaced with more targeted ones and effective testing. The Commission recently invited EU Member States to extend restrictions on non-essential travel into the EU from third countries until 15th
Tourism: The Commission published a package of guidelines and recommendations to help Member States gradually lift travel restrictions and allow tourism businesses to reopen. It includes an overall strategy for recovery of the industry in the coming years, the above-mentioned common approach to border openings, a framework to re-establish transport, recommendations to the industry to make travel vouchers more attractive than reimbursements to ease liquidity pressure, and criteria to safely open tourism operations. With an eye on tourism and vacation, the Commission also urged developers of contact tracing apps to ensure EU-wide interoperability. Citizens should be able to receive alerts regardless of their location and of which app they were using. For this purpose, the Commission published a European interoperability framework (source: POLITICO).
Border management and movement:The German industry lobby BDI has criticised the European Commission’s border management, including reopening coordination. The group said that the chaos that erupted when borders were closed must not repeat when borders are opened again, which implies Member States need to coordinate at EU level. BDI also called for the re-establishment of freedom of movement as fast and ambitiously as possible to allow for a substantial recovery of the European economy (source: POLITICO).
State Aid: Since this newsletter was published last, the Commission approved a number of Member State state-aid applications under the temporary framework for state aid. Below is an overview, and here are all the details.
- Czech Republic: €7.3 million for COVID-19 R&D
- Hungary: €314 million supporting agrifood SMEs
- Netherlands: €650 million for horticulture and potato sectors
- Poland: €450 million for companies affected by COVID-19
- Greece: €500 million for self-employed
- UK: €10.3 billion for self-employed and partnerships
- Malta: €11.5 million for the production of COVID-19 relevant products
- Latvia: €1.5 million for agricultural sector
- Belgium: €25 million for Wallonian COVID-19 R&D
- Croatia: €322 million for micro- and SMEs affected by the outbreak
OLAF: The European Union’s anti-fraud office has reportedly cracked down on forged or substandard personal protective equipment. The organisation said it seized millions of products, and identified over 340 companies who contributed to their distribution within the last two months. OLAF reiterated the importance of global cooperation to protect consumers around the world from fraudulent products.
European Health Package: S&D drafted a proposal to increase the EU’s authority over health matters, consisting of 12 separate proposals. They call for a stress-test of national health systems and a Commission proposal for minimum healthcare standards based on the outcome of this test. Next to a European Health Response Mechanism jointly led by the Commission and the European Centre for Disease Prevention and Control, S&D also proposes to use joint procurement for certain medical items that are hard to get or rarely needed.
Council (and other ministerial bodies)
SURE: The Council has agreed on final changes to the Commission’s employment re-insurance programme SURE, allowing for €100 billion payouts to compensate lost income. Previously, the Netherlands asked for a sunset-clause for the programme. EU ambassadors reportedly agreed on a compromise, including more legal certainty for the Dutch. SURE is planned to end in 2022, but could technically be prolonged with a qualifying majority. The Dutch demanded that extension need unanimity. The Council is expected to launch a written procedure on Friday, 15th May to adopt a new draft (source: POLITICO).
Eurogroup: The finance ministers of euro-countries met on 8th May to discuss the features of the Pandemic Crisis Support provided by the ESM. According President Centeno, all euro area countries were eligible for support. The Eurogroup also discussed the economic situation in the euro area and reiterated the urgency for the group’s measures.
EU Health Ministers met on Tuesday to discuss the impact of COVID-19 on access to medicines and provide feedback on a Pharmaceutical Strategy for Europe. According to a press statement, the participants stressed universal access as main objective to medical supply chains, and pointed to the necessity of early detection of shortages and increased production. According to ministers, the outbreak worsened the existing European problem with imported medicines. Commissioner Kyriakides said a centerpiece to the new Pharmaceutical Strategy would be to reduce dependence on single manufacturers or countries for essential medicines, and to re-shore the capacity to produce those within the EU.
Budget & Recovery
Recovery Instrument in sight: President Von der Leyen has presented the outlines of a new Recovery Instrument to the European Parliament. The package, which will also include grants, will consist of three parts: a fund for public investments and reforms, support for strategic and private investments, and funding for priority sectors such as research and health. The funding would be raised through capital on international markets and channelled to recipients through existing EU programmes. Directed at the European Parliament, Von Der Leyen noted that all funding would be subject to parliamentary oversight. First payouts could be frontloaded as soon as this year (source: POLITICO).
Commission will make a move: The Commission is expected to present an updated version of its 2021-2027 budget proposal and Recovery Instrument later this May. The budget has previously been subject to much debate and contradicting positions of Member States, but leaders have also disagreed over the nature of a Recovery Fund. The countries most affected by COVID-19 favour grants, while other Member States prefer loans (source: POLITICO).
Green Deal remains strong: The Green Deal will be the Commission’s priority when recovering from COVID-19, Commissioner for Environment Virginijus Sinkevičius said during an exchange of views with the European Parliament on Tuesday, 12th The Commission will not accept industries using the COVID-19 crisis as an excuse to delay processes or lower ambitions. Cambre Associates followed the exchange.
Bailouts: The Commission has adopted new recapitalisation rules for companies who are in difficult waters due to the COVID-19 crisis and its economic impact, with the objective of limiting distortion. The main point is that Member States can purchase shares from companies that had not been in trouble before the crisis hit, and recapitalisation can only take the extent of pre-crisis levels. Additionally, a Commission official talked about increasing remuneration of state ownership, banning dividend distribution and bonusses as disincentives against over-compensation. Companies who are selling more than 25% of shares to Member States are expected to present an exit plan, and if the state is still involved after six years’ time, the company will be forced to re-structure. However, state-backed recapitalisation does not come with green requirements (source: POLITICO).
Tackling the Virus & Medical Procurement
Big trials needed: The European Medicines Agency’s (EMA) executive director, Guido Rasi, has told the European Parliament’s health committee that small clinical trials were seen critically by EMA. Because such trials enlisted only a small number of patients, they were likely not producing significant results. Instead, Guido Rasi said, it was important to coordinate on European level to generate required levels of evidence for market authorisation. Those approvals would have to be based on robust data to enable regulatory decision-making without jeopardising patient’s health and safety. Larger clinical trials are also needed to evaluate the possible use of chloroquine and hydroxychloroquine, two drugs heavily promoted in the past but sometimes leading to unwanted cardiovascular effects (source: POLITICO).
Funding research: The Innovative Medicines Initiative, a joint partnership between the Commission and the pharma industry, has selected eight initiatives to receive in total €117 million for COVID-19 research. Originally, the Commission planned to contribute €45 million, matching industry contributions. Upon receiving more qualified proposals than estimated, the Commission decided to increase its share to €72 million. Five of the projects selected are working on diagnostic tools that can be used in peoples’ homes and deliver results within one hour. Other projects work on treatment and epidemic preparedness.