France and Germany unveil joint initiative for European recovery, WTO discusses impact of the pandemic, European Commission announces further 122 million euro for COVID-19 related R&D
Franco-German Initiative for European Recovery
Germany and France have published a joint paper that details a host of responses to the COVID-19 outbreak and the strain it put on economies and health systems. The document, which has been published six weeks before Germany takes over the Council Presidency, includes proposals for health reform, the recovery fund, green and digital transitions, and industrial strategy.
- Health: The proposal calls for a more strategically positioned and less dependent EU healthcare system, including increased R&D capacity, strategic stockpiles and coordinated procurement, a health task force mandated to draft prevention and reaction plans, and common health data standards for interoperability.
- A Recovery Fund under the next MFF, frontloaded during the first years. France and Germany propose to finance this through common, European debt by allowing the Commission to borrow on markets on behalf of the EU. The €500 billion Recovery Fund should be targeted towards the most affected sectors, targeting the challenges of the pandemic and the aftermath. The proposal foresees payouts in the form of grants, coupled to Member State commitments to sound economic policy and ambitious reform agendas, and calls for a swift agreement on EU level. The proposal also reiterates a call for fair-taxation initiatives, especially on digital taxation following OECD proposals.
- Green Deal: France and Germany commit to the Green Deal but call for more ambitious 2030 emission reduction targets, in combination with updated carbon border and trading rules, as well as state aid rules. For digitalisation, the proposal urges the roll-out of 5G, efforts for secure infrastructure and AI frameworks, among others.
- Industrial: To strengthen the resilience of the single market, France and Germany call for diversified supply chains, stronger trade enforcement, investment screening, and adapted state-aid and competition rules to modernise EU policy. The countries also foresee a fully functioning Schengen area with improved coordination obligations between Member States in times of crisis.
The proposal has been met with mixed reactions throughout Europe. Italy and Spain, severely hit by the pandemic, have welcomed the proposal, as did the Commission, who is to publish its budget proposal next week. The so-called “frugal states” (Netherlands, Austria, Denmark, and Sweden) voiced reservations, together with some Eastern European countries such as Hungary. Austria announced it would publish its own proposal (source: POLITICO).
European Semester Spring Package: The European Commission published proposals for country-specific recommendations detailing economic policy guidance for Member States. The recommendations, on the one hand, focus on mitigating the short-term economic and social impact of the pandemic, and on the other plan sustainable and inclusive growth to facilitate the green transition and digital transformation. The Country Specific Recommendations reflect the Commission’s priorities as to sustainable growth through green and digital transition. They also take into account economic recovery, national health systems reform, social consequences of the pandemic, and the activation of the general escape clause with respect to fiscal deficit rules.
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: €18.5 billion guarantee scheme for companies
- Finland: €600 million state guarantee for loan to Finnair
- Italy: €70 million direct grants to agriculture and fishery sector
- Austria: €84 million regional aid scheme for R&D of COVID-19 response products
- Hungary: €99 million to agri-food, aquaculture, and forestry sectors
Council (and other ministerial bodies)
SURE: The Council adopted SURE, a €100 billion employment re-insurance programme aiming to support workers and independents who lost income due to the economic impact of the COVID-19 outbreak. It allows Member States to request assistance with increased expenditure related to national short-time work schemes as of February 2020. SURE allows the Commission to borrow capital based on Member State guarantees, and it will become operational once Members provided their guarantees. SURE includes a sunset clause for 31st December 2022.
World Trade Organisation (WTO): The WTO General Council met virtually on 15th May. Over 60 delegations addressed the impact of the pandemic, short-term approaches, as well as long-term strategies to mitigate the economic plunge that results from the outbreak of COVID-19. Director-general Azvedo, who announced his retirement last week, said he called “upon all members to resist policies that may further disrupt supply chains and add to the strains on an already fragile global economy. To build more resilient national economies, we must build more resilient international cooperation – and a more resilient and effective multilateral trading system.” In a statement, the EU stressed that no country could secure the supply of products it needs on its own – warranting global integration. Relating to the pandemic, the EU demanded:
- To ‘name and shame’ the countries that do not track the direct health response and economic support measures. The EU pointed towards proposals it made to improve compliance with notification requirements, a field of reform the EU sees as crucial for proper working of WTO monitoring.
- For the WTO to encourage the collaborative provision of medicine and equipment against COVID-19, including voluntary pooling of rights and licensing. The EU is exploring ways to facilitate trade in such goods and address restrictive tariff and non-tariff barriers.
World Health Organisation (WHO): The WHO held its 73rd World Health Assembly on Monday, 18th The conference was marked by tensions between China and the U.S., but the Assembly unanimously adopted a resolution. Core points are the call for an investigation to “identify the zoonotic source” of COVID-19 (i.e, find the origin of the pandemic), the call for accessibility and affordability of a vaccine, and the commitment to review the WHO’s performance in response to the pandemic (source: POLITICO).
- Sharing tech: The World Health Organisation backed a proposal from Costa Rica to establish a COVID-19 “technology pool” of any future vaccines, therapeutics or intellectual property related to addressing the pandemic. Announcing support for the idea today, WHO Director General Tedros Adhanom Ghebreyesus said that while vaccines provide hope, “they will not end the pandemic if we cannot ensure equitable access to them.” He added that “traditional market models will not deliver at the scale needed to cover the entire globe.” The repository will be voluntary and is set to officially be launched on May 29 (source: POLITICO).
Borders: The Ministers of Foreign Affairs of Austria, Bulgaria, Cyprus, Spain, Croatia, Germany, Greece, Italy, Malta, Portugal and Slovenia met via videoconference on Monday, 18th May to discuss reinstating the freedom of movement within the EU. The group, in a statement, welcomes the guidelines published by the Commission, and reiterates that a phased and coordinated approach is needed to re-open the borders, avoiding an increase in infections getting out of hand. Also important are coordinated approaches to quarantine requirements, transport services, and health-related standards. The Member States are urging tourism operators to take appropriate precautionary measures to protect travellers.
Tackling the Virus
Research and Development: The Commission announced a further €122 million funding from the Horizon 2020 programme to be invested in COVID-19 related research and innovation initiatives. The funding contributes to a prior €1.4 billion pledge by the EU, and in particularl expands the funding previously announced in partnership with the European Innovation Council. The €122 million are intended to support repurposing of manufacturing for rapid production of vital medical supplies and equipment needed for testing, treatment, and prevention, as well as development of medical tools and digital technology.
Remdesivir: In a statement before the EP’s ENVI committee, European Medicines Agency chief Rasi said that the drug remdesivier could potentially be conditionally approved for marketing in the EU soon. This authorisation would still be subject to continuously submitted evidence of ongoing reviews. Remdesivir had originally been developed by Gilead to fight Ebola, but could potentially be beneficial for treatment of COVID-19. Conditional authorisations are valid for one year but can be renewed (source: POLITICO).
Breton and Zuckerberg: On 18th May, CERREbrought together Thierry Breton, European Commissioner for the Internal Market, and Mark Zuckerberg, Facebook CEO, to discuss the role and responsibilities of online platforms during the COVID-19 crisis management and future recovery stage. On data, Zuckerberg said that he has been generally in favour of data portability and that having the right regulation to enforce this would be very helpful. He argued that the hard question is defining “what is your data” and, in the context of social services, “what is other person’s data”. He is working on an industry consortium called the Data Transfer Project to enable that. Breton explained access to data and its ownership will be part of the new Regulation. First there is the personal data that belongs to people and regulated in part by the GPDR, secondly there is the industrial data. Europe is here probably more advanced than the U.S. or China, he said. The conditions, including the market, already exist. A proper framework is to be developed. Regarding fake news, the Commissioner told Zuckerberg the Fake News Buck stops with him :”Disinformation is a huge issue. When you are the CEO, at the end of the day, you are the only one to be responsible, no one else”. POLITICO reports that whether Breton is in favour of harsh platform regulation or light-touch rules remains unclear after the debate. Both men praised collaboration between platforms and democratic governments (source: POLITICO).
Automotive: Commissioner Breton has commented on calls to postpone or weaken climate legislation for car producers. Carmakers originally called for more flexibility on emission rules to meet challenges posed by the crisis. The industry has also lobbied for the introduction of a subsidy scheme for green vehicles. Breton has managed expectations saying that the Commission was “in favour of everything green”, but also stated that it would not budge on climate targets.