The COVID-19 outbreak has already provoked multiple economic impacts for European countries, and its future developments – both in terms of timing and intensity – are hardly anticipable. The institutional responses against the virus and its effects are being designed and/or amended on a daily basis, across different levels of governance, and are largely affected by a fast-changing and unpredictable reality.
As consumption, private investment and international exchanges of goods and services are already highly compromised, governments must play a strategic role, which should consist in:
- Guaranteeing the necessary provisions to contain the spread of the virus and providing effective healthcare infrastructures, including the provisioning of sufficient medical and care capacities, the stocking of medical, sanitary and hygienic material, the acquisition of reliable data concerning infection rates etc allowing reliable forecasts and a well-functioning co-operation between the health care sector, virologic institutes and governments.
- Protecting economic structures in order to avoid their collapse and, in the near future, foment their full rehabilitation and the consequent re-establishment of growth.
Whilst the economic and social impact of the COVID-19 outbreak remains difficult to precisely estimate, we urgently need measures aimed at protecting economic structures in order to avoid their collapse and, in the near future, enable their full rehabilitation and the consequent re-establishment of growth.
In its paper, CEEP argues in support of an immediate economic response and dedicated instruments, highlighting the institutional constraints that must be tackled in order to build an efficient and unified approach at the EU level, and focusing on the following:
- The European Stability Mechanism: The use of the ESM to face symmetric shocks can only be effective if its provisions are adapted to the specific challenge, including in this case a long duration and a commitment by Member States to full transparency.
- The European Instrument for Temporary Support to Mitigate Unemployment Risks in an Emergency (SURE): SURE funding must effectively be dedicated to measures protecting employees and self-employed against the risk of unemployment and loss of income, and should therefore be transparent and monitored in the context of the European Semester, in cooperation with the social partners.
- The Coronavirus Response Investment Initiative and the suspension of the SGP: It is essential that these new resources properly address the urgent needs of the actors fighting the COVID-19 outbreak and CEEP welcomes the commitment of the EU institutions to a fast track approach for adoption and implementation. Beyond the immediate emergency, the challenge ahead lies in dealing more constructively with fiscal consolidation whilst keeping debt levels at sustainable levels.
- The role of the European Central Bank: The ECB is providing a comprehensive financial protection shield for Europe and the Euro area in this sense. However, the ECB cannot act alone and there is an urgent need for an EU fiscal policy and a solidarity between Member States to further materialise in order to properly tackle this crisis.
You can consult the full CEEP Paper “The Design of an Efficient and Unified Economic Response” here.