Coronavirus Update – COVID19 Newsletter 24.03
This document summarises recent factual developments in the crisis response in Europe to the COVID-19 pandemic. In this summary we focus on the economic and business impact and major EU-level policy initiatives.
This newsletter has been carefully compiled by our expert colleagues from Brussels. If you are interested in this daily service, please mail to: Wolter Hamelink.
Crisis coordination & competencies
French commissioner Thierry Breton urges telecom operators to hand over people’s anonymised and aggregate mobile metadata. Smartphone apps offer great granularity of people’s activities, including who they have been in contact with. Spain, Romania, Poland are already using such technologies to track those who have been infected.
On 23 March the European Commission (EC) established new practical advice on how to execute the guidelines for border management. The Commission wants each member state to establish ‘green lane’ border crossings, which would allow the EU-wide supply chains to continue to operate. Member States will have to ensure that borders remain open to all freight vehicles with no discrimination based on their nationality or the goods they carry allowed. Crossing the border, including any checks and health screening, should be minimised and not take more than 15 minutes. The Commission also urged that Member States suspend all road access restrictions currently in place in their territory, such as weekend, night and sectoral bans and encourage member states to set up passage transit corridors, which should allow private drivers, regardless of their nationality, to directly pass with priority through the country in each necessary direction.
After an urgent request for the European Commission the European Committee for Standardization (CEN) and the European Committee for Electrotechnical Standardization (CENELEC) came to an agreement to make a series of European standards (ENs) available for medical devices and personal protective equipment. The measure is intended to help tackle the shortage of medical equipment and enable more fluent access to market of fundamental equipment.
Economic and financial measures
Justice and Consumers Commissioner Didier Reynders asked more due diligence of Facebook, Google, Amazon, Alibaba, eBay, Rakuten, CDiscount, Wish and Allegro, requesting that they “better identify scams and unfair practices from rogue traders during covid-19 outbreak.”
On 23 March climate think-tank Ember revealed that the EU carbon prices collapsed to as low as €15.45 a tonne, compared to around €23 at the beginning of March. This is the result of a week-on-week decrease in the electricity demand of 2-7% in each European country as coronavirus-related confinement measures were enforced. The
price drop can be compared to that in 2008, which undermined the Emissions Trading System for a decade. The silver lining is that since 2019 a reform buffer, a Market Stability Reserve mechanism (MSR) that removes surplus permits, was introduced.
Máximo Miccinilli, Energy Director at the Centre on Regulation in Europe (CERRE) warned that “the uncertainty and instability of the system may undermine the plans to phase out coal. It may also reduce public income from auctioning revenues and may slow down low-carbon investments.” Miccinilli calls on the Commission to consider urgent action to prevent the carbon market from collapsing and ensure stable carbon prices and has asked the Commission to delay the introduction of a carbon border mechanism.
On 23 March the ministers of finance of the EU Member States agreed that the conditions for the use of the general escape clause of the EU fiscal framework were fulfilled as the Commission had indicated on 20 March. The clause will allow the Commission, the Council and Member States to undertake necessary policy coordination measures within the framework of the Stability and Growth Pact while being able to tackle the economic crisis without being tied to the budgetary requirements that would normally apply.
The European Commission has announced an extension to the validity of block exemption for liner shipping consortia until 25 April 2024. This regulation ensures that liner shipping consortia can provide joint services without infringing EU antitrust rules that prohibit anticompetitive agreements between companies. The current Consortia Block Exemption Regulation was due to expire on 25 April 2020.
Shares across Europe were up this morning on the news of robust stimulus packages from the German government and the US Federal Reserve. Frankfurt’s DAX leapt 6.4%, the Paris CAC 40 soared 5.3% and the FTSE 100 was up 4.1% and Dublin’s ISEQ 3.4% Last week saw fluctuations of around 4% in both directions across these indices, but the European markets remain down by about 30% since the onset of the crisis.
On 24 March the Eurogroup will convene for an evening video conference on a coordinated EU crisis response. More information on the conference will be available in the next report.
Initial responses to the coronavirus pandemic are in the hands of EU member-state national governments as healthcare remains an exclusive national competence. Other measures taken include limitations on travel, trade and economic support measures.
Economy: Belgium’s finance minister Alexander De Croo released a details of a raft of measure taken to shore up the economy. An agreement with the banks and the National Bank of Belgium means that businesses and the self-employed will be granted a postponement of credit repayment until the end September. After that lending to businesses will be maintained at the level of the ‘bazooka’ of €50bn that the federal government is using to guarantee business loans. The comes on top of the postponement of the payment of VAT, withholding tax, social security contributions and corporate income tax.
Travel: Belgium and the Netherlands have agreed a vignette (windscreen sticker) system for cross-border workers.
Economy: On 23 March the French prime minister Edouard Philippe announced stricter social isolation rules to take effect today (24 March). French medical staff is asking for total containment but President Emmanuel Macron is opposed to it, preferring to tighten up current measures. A new opinion from the scientific council is expected on 24 March. Philippe said that extension of the rules could last a few weeks, without giving a more precise timeframe. Fines have been strengthened and will increase from €135 to a €1,500 fine in case of repeated offence.
Economy: On 23 March the Federal cabinet introduced a bill to establish an Economic Stabilisation Fund (WStFG) that would assume guarantees of up to €400bn for debt instruments and justified liabilities of companies in order to eliminate liquidity bottlenecks and to support capital-market refinancing.
The bill is expected to become law on 28 March following swift passage of both houses of parliament, and will remain in force until 31 December 2021. The law is subject to EC approval, as the measures must be compatible with state-aid regulations. The law will apply to companies which are not active in the financial sector that 1) have a balance sheet total of more than €43m and/or 2) more than €50m in turnover, and/or 3) more than 249 employees on an annual average. In individual cases the law will also be applicable to smaller companies that are important for critical infrastructure.
Economy: The Hungarian government is seeking to extend indefinitely the state of emergency introduced on 11 March. The enablig bill would grant the government special powers, including the ability to rule by decree without parliamentary approval, for as long as the government considers it necessary in light of the epidemic. The proposal would require the support of 80% of parliamentarians to pass.
The Hungarian government has announced a suspension of monthly payments on loans for individuals and businesses, provided that loans were concluded before 18 March 2020. Employees working in severely hit industries (tourism, hospitality, entertainment sector) will pay lower social security contributions in 2020. Tax authorities are to exempt 81,480 SMEs from the flat-rate tax liability until 30 June. Employer’s contributions are also suspended until the same date. Media service providers will also be tax exempted due to loss of advertising revenue. Evictions and seizures are also suspended until after the end of the pandemic, and maternity benefits that end during the period are to be prolonged.
Hungary’s prime minister Viktor Orbán has said that that the first purpose of these economic measures is to mitigate the economic slowdown, and that these will be followed by new ones to restart the Hungarian economy. In connection to the loan repayment moratorium, he stressed that the banks will not be left without support, and that the central bank will provide them with the necessary liquidity for this year.
Travel: Hungary has kept its borders closed since 16 March.
Economy: The European Commission approved Luxembourg’s €300m scheme to support affected companies.
Economy: The Dutch justice minister Ferdinand Grapperhaus and prime minister Mark Rutte announced on 23 March that all public gatherings are prohibited until 1 June. Mayors are given more opportunities to act if citizens do not follow social distancing rules. This will make it easier for local governments to close shops, parks, playgrounds or beaches if too many people gather. Hairdressers and beauticians are closed until 6 April.
Travel: The Netherlands and Belgium have agreed a vignette (windscreen sticker) system for cross-border workers.
Economy: Poland will delay the implementation of a new system for classifying goods and services for value-added tax until 1 July.
Several Polish state-run firms have indicated that they wish to help in the fight against the pandemic. Fuel company Lotos has said it will allocate PLN 5m (€1.1m) to help stem the spread of the disease, and state-owned Bank Pekao has offered to donate the same amount to the country’s health service. Polish oil giant PKN Orlen has launched production of hand sanitisers at a plant that normally manufactures windscree washer fluid.
Economy: The UK’s prime minister last night announced further lockdown measures calling on people to stay at home except for very limited circumstances, namely shopping for “basic necessities” as infrequently as possible; medical reasons, to provide care, or to help a vulnerable person; travelling to and from work, but only if “absolutely necessary”, and once a day for exercise, alone or with household members. The guidance also lists businesses that are allowed to stay open.
A joint statement by the Bank of England and UK banks was released in which they assured that “the UK’s banks are in a strong position to provide further support to the economy and are ready and willing to do so”, despite the massive economic hit to the economy.
Amid increasing calls also calls to support self-employed workers who were largely left out of the government’s previously-announced economic support plans, the Chancellor of the Exchequer Rishi Sunak said he was “determined” to help but didn’t provide further detail how.
London mayor Sadiq Khan criticised the government’s stance on construction workers who themselves said they did not consider their work to be ‘essential’. Cabinet minister Michael Gove later said construction work could continue if it can be done safely in the open air, but work carried out at close quarters in someone’s home would not be appropriate.
Sports Direct was criticised for initially keeping stores open on the grounds that keeping fit is essential through the crisis. The company has now bowed to pressure to close its stores.
This week 23-27 March: A number of high-level videoconferences are scheduled. These will address the impact of the COVID-19 virus on different sectors
Tuesday 24 March
– (Possible) informal videoconference of Ministers for European Affairs
– Eurogroup videoconference
– Political and Security Committee
Wednesday 25 March
– Informal videoconference of Ministers responsible for Agriculture and Fisheries
Thursday 26 March
– Videoconference of Members of the European Council where new measures will be announced
Friday 27 March
– Informal videoconference of Ministers responsible for Cohesion/regional policy