With intra-EU borders closing, whole economies going into lockdown and intricate global supply chains breaking down, EU leaders this week pledged to do whatever it takes to protect the economy and support a rapid recovery.
Following the European Central Bank’s announcement last week that it would significantly step up its asset-purchasing programme to €120 billion by the end of the year and temporarily relax rules to encourage banks to step up lending to the real economy, the Bank’s Governing Council announced late Wednesday that it would, with immediate effect, launch a Pandemic Emergency Purchase Programme (PEPP). Under the new programme, the ECB will purchase an additional €750 billion in private and public sector assets until at least the end of 2020.
The PEPP announcement came after it was widely criticised by the financial markets for not further cutting its benchmark interest rate from negative 0.5%, offering too little in liquidity support for the real economy and shifting responsibility onto national economies.
The ECB’s statement also came at the end of a week in which European leaders sought to reassure its citizens, businesses and financial markets that it would throw every financial resource at their availability to prevent a repeat of the social and economic fallout of the 2008 economic crisis and that they stood ready to support a rapid economic recovery once the immediate COVID-19 impact has receded.
On Monday, the Eurogroup held an integrated meeting with all EU finance ministers for a coordinated pan-European economic and fiscal response to the COVID-19 crisis. At the meeting, which was held by videoconference and chaired by Eurogroup President Marió Centeno, ECOFIN ministers agreed on coordinated fiscal measures of about 1% of GDP, on average, for 2020 as well as the provision of liquidity provisions of at least 10% of GDP.
Finance ministers’ commitments to protecting Europe’s economies from COVID-19 are stark, as member states currently pay 1% of Gross National Income (GNI), on average, into the EU’s annual budget. Considering EU leaders failed to reach an agreement on the EU’s MFF over a proposal of 1.074 of GNI only four weeks ago, the resources they are now willing to commit to tackling the coronavirus fallout highlight member states’ fear of the pandemic’s impact to their national economies.
At their virtual meeting, ministers also agreed to make full use of automatic fiscal stabilisers such as taxation or welfare spending to target containment and treatment measures as well as provide necessary liquidity supports to affected citizens and businesses. In addition, they also pledged to make full use of and supplement EU-level economic stimulus measures such as the European Commission’s temporary relaxation of state-aid rules or the new €37 billion Coronavirus Response Investment Initiative.
Besides economic stimulus measures, the European Commission on Thursday also announced the creation of the first-ever “rescEU” stockpile of €50 million worth of medical equipment. According to European Commission President von der Leyen and Commissioner for Crisis Management, Janez Lenarčič, medical equipment part of the stockpile will include items such as intensive care medical equipment, for example ventilators, personal protective equipment, reusable masks, vaccines and therapeutics, and laboratory supplies.
The stockpile will be hosted by one or several member states. While the host will be responsible for procuring the equipment, the European Commission will finance 90% of the stockpile. The EU’s joint Emergency Response Coordination Centre will manage the distribution of the equipment to ensure it goes where it is needed most.
Taoiseach Leo Varadkar addresses the nation
Taoiseach Leo Varadkar gave an unprecedented St Patrick’s Day address on Tuesday. It was a “St Patrick’s Day like no other” he said, and found the right words to give a realistic, yet reassuring speech to an anxious nation. He gave a frank assessment of the impact of the Coronavirus on Ireland, the devastating consequences it is likely to have, and what citizens can do to play their part. Varadkar has received widespread praise for his ability to show guidance and leadership in an unprecedented national emergency.
The Irish Parliament is set to pass an emergency piece of legislation, the Health Preservation and Protection and other Emergency Measures in the Public Interest Bill. The law aims to safeguard the lives of citizens, and to ensure they have sufficient financial resources (illness benefits for those affected by the coronavirus, and payments for those who become unemployed as a result of the spread of the virus). The new laws will also allow the State to shut down mass gatherings.
Yesterday Minister for Education Joe McHugh announced the cancellation of Leaving Cert and Junior Certificate oral and practical exams. All students who were due to take these tests will be awarded full marks for this portion of the exam. Varadkar has warned that schools may remain closed until May.
On Wednesday, Minister for Finance and Public Expenditure Pascal Donohoe announced further measures to support individuals and businesses impacted by COVID-19. Proposed measures include flexible arrangements, including payment break for mortgages and other loans, support for buy to let bank customers with tenants affected by COVID-19, and extensive supports for SME customers.
In order to support public health policy, the Minister is requesting that industry increase the limit on contactless payments to €50. Donohoe stated it is “incumbent on those citizens who continue to receive their full income to do their part by paying their bills, taxes, and loans on time, so as the maximum amounts of supports are available to our fellow citizens who are most in need.”