Under this new initiative, the Commission proposes to direct EUR 37 billion under Cohesion policy to the fight against the Coronavirus crisis. To this effect, the Commission proposes to relinquish this year its obligation to request Member States to refund unspent pre-financing for the structural funds. This amounts to about EUR 8 billion from the EU budget, which Member States will be able to use to supplement EUR 29 billion of structural funding across the EU. This will effectively increase the amount of investment in 2020 and help to front-load the use of the as yet unallocated EUR 28 billion of cohesion policy funding within the 2014-2020 cohesion policy programmes.
In order to quickly direct these €37 billion of European public investment to address the consequences of the coronavirus crisis, the Commission proposes to relinquish this year’s obligation to request refunding of unspent pre-financing for the European Regional Development Fund (ERDF), the European Social Fund (ESF), the Cohesion Fund (CF) and the European Maritime and Fisheries Fund (EMFF) until programme closure.
In addition, the Commission is proposing to extend the scope of the EU Solidarity Fund by also including a public health crisis within its scope, in view of mobilising it if needed for the hardest hit Member States. Up to EUR 800 million is available in 2020.
Mobilising the EU budget
To bring immediate relief to hard-hit SMEs, the EU budget will deploy its existing instruments to support these companies with liquidity, complementing measures taken at national level. In the following period, EUR1 billion will be redirected from the EU budget as a guarantee to the European Investment Fund to incentivise banks to provide liquidity to SMEs and midcaps. This will help at least 100,000 European SMEs and small mid-caps with about EUR 8 billion of financing.
Moreover, the Coronavirus Response Investment Initiative will facilitate the deployment of the European Social Fund – a fund geared towards supporting workers and healthcare.
The European Globalisation Adjustment Fund could also be mobilised to support dismissed workers and those self-employed under the conditions of the current and future Regulation. Up to EUR 179 million is available in 2020.
The European Maritime and Fisheries Fund (2014-2020) has a budget of €5.7 billion in shared management with Member States. Many Member States still have a substantial EMFF budget left to support their fisheries, aquaculture and processing sectors, which they can use until the end of 2023. They can redirect the unspent budget to existing and new EMFF measures in their programme to reduce the negative impact of the Coronavirus crisis on the workers and businesses in these sectors.
EMFF Regulations[1]
It is proposed to amend the EMFF Regulation (EU) No 508/2014 as follows:
Article 35 is modified to make it possible for the EMFF to contribute to mutual funds which provide financial compensation to fishermen for economic losses caused by a public health crisis as follows: “In Article 35, paragraphs 1, 5, 6 and 8 are replaced by the following :
“1. The EMFF may contribute to mutual funds which pay financial compensation to fishermen for economic losses caused by a public health crisis, adverse climatic events or by environmental incidents or for the rescue costs for fishermen or fishing vessels in the case of accidents at sea during their fishing activities.”
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“5. Member States shall define the rules for the establishment and management of the mutual funds, in particular for the granting of compensation payments and the eligibility of fishermen for such compensation in the event of a public health crisis, adverse climatic events, environmental incidents or accidents at sea referred to in paragraph 1, as well as for the administration and monitoring of compliance with those rules. Member States shall ensure that the fund arrangements provide for penalties in the case of negligence on the part of the fisherman.”
“6. Public health crises, adverse climatic events, environmental incidents or accidents at sea referred to in paragraph 1 shall be those that are formally recognised by the competent authority of the Member State concerned as having occurred.”
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“8. The contributions referred to in paragraph 1 shall only be granted to cover losses caused by public health crises, adverse climatic events, environmental incidents or accidents at sea which amount to more than 30 % of the annual turnover of the business concerned, calculated on the basis of the average turnover of that business over the preceding three calendar years.”
- Article 57 is modified to add the possibility for the EMFF to safeguard the income of aquaculture producers by contributing to an aquaculture stock insurance covering economic losses due to a public health crisis,
- In order to respond to impacts of the crisis, the EMFF should support mutual funds and stock insurance to safeguard the income of fishermen and aquaculture farmers affected by a public health crisis.
Measures immediately available under current EMFF rules: actions by producers’ organisations and by Member States
A series of measures under the EMFF are immediately available under current EMFF-rules. Details can be found here – https://ec.europa.eu/fisheries/sites/fisheries/files/2020-information-note-coronavirus_en.pdf . Examples include:
- Producers’ organisations can, at short notice, adapt their Production and Marketing Plans (PMPs) to the evolving situation. This includes adapting their extraction and marketing strategies in order to continue a certain level of fishing activity and therefore ensure their economic viability and a stable supply to the market.
- Member States are strongly advised to use the possibility for an advance of at least 50% of the financial support provided to the Production and Marketing Plans. For all valid PMPs, such advances may be paid without delay.
- Both of the above can be pursued in parallel. Once a new PMP is approved, new advances must be paid. There is therefore a way to rapidly and legally inject liquidities. As payments related to the preparation and implementation of PMPs are conditioned on the approval of the annual report, payments related to past PMPs should be accelerated. In most cases, annual reports on the implementation of the 2019 PMPs (or 2019 phase of multiannual PMPs) have been or will shortly be submitted. Competent authorities should treat the related payment requests promptly.
- The Commission encourages Member States to ensure swift payments to beneficiaries, including through advances where possible, and to consider an accelerated selection of beneficiaries. This will help to keep cash flows in support to the sector.
- The EMFF supports community-led local development by providing financial support to Fisheries Local Action Groups (FLAGs), who implement their strategies. These strategies can be relatively easily and quickly updated or modified to take into account needs arising from the impact of the Coronavirus pandemic. Member States are encouraged to communicate this possibility to their respective FLAGs.
Compensating economic losses of fishermen and aquaculture producers through the EMFF
The Commission has proposed to extend the scope of insurance mechanisms in the European Maritime and Fisheries Fund (EMFF) to pay financial compensation for economic losses caused by a public health crisis. If Member States activate these measures, the EMFF could contribute to mutual funds or stock insurance contracts to compensate fishers and aquaculture farmers whose economic losses amount to more than 30% of their annual turnover.
State aid Framework Flexibility[2]
The main fiscal response to the Coronavirus will come from Member States’ national budgets. EU State aid rules enable Member States to take swift and effective action to support citizens and companies, in particular SMEs, facing economic difficulties due to the COVID-19 outbreak.
In line with EU rules on state aid, temporary limited amounts of aid in the form of direct grants or tax advantages can be granted by Member States (national funding) to undertakings in the fisheries and aquaculture sector that find themselves facing a sudden shortage or unavailability of liquidity.
In view of the current crisis, the Commission has proposed a new temporary State Aid Framework on 19 March 2020, under which aid to fisheries and aquaculture can be authorised up to a level of €120,000. Beneficiaries can be undertakings which face difficulties as a result of the Coronavirus outbreak. This temporary aid does not apply to cases explicitly excluded from the de minimis aid in the fishery and aquaculture sector. Aid can be granted until 31 December 2020.
Member States can also give public guarantees on loans and enable public and private loans with subsidised interest rates, subject to specific conditions.
Τhe Temporary Framework provides for five types of aid:
(i) Direct grants, selective tax advantages and advance payments: Member States will be able to set up schemes to grant up to €800,000 to a company to address its urgent liquidity needs.
(ii) State guarantees for loans taken by companies from banks: Member States will be able to provide State guarantees to ensure banks keep providing loans to the customers who need them.
(iii) Subsidised public loans to companies: Member States will be able to grant loans with favourable interest rates to companies. These loans can help businesses cover immediate working capital and investment needs.
(iv) Safeguards for banks that channel State aid to the real economy: Some Member States plan to build on banks’ existing lending capacities, and use them as a channel for support to businesses – in particular to small and medium-sized companies. The Framework makes clear that such aid is considered as direct aid to the banks’ customers, not to the banks themselves, and gives guidance on how to ensure minimal distortion of competition between banks.
(v) Short-term export credit insurance: The Framework introduces additional flexibility on how to demonstrate that certain countries are not-marketable risks, thereby enabling short-term export credit insurance to be provided by the State where needed.
European Fiscal Framework Flexibility
The Commission will propose to the Council to apply the full flexibility provided for in the EU fiscal framework so that they can implement the measures needed to contain the coronavirus outbreak and mitigate its negative socio-economic effects.
First, the Commission considers that the COVID-19 pandemic qualifies as an “unusual events outside the control of government”. This allows accommodating exceptional spending to contain the COVID-19 outbreak such as health care expenditure and targeted relief measures for firms and workers.
Second, the Commission will recommend adjusting the fiscal efforts required from Member States in case of negative growth or large drops in activity.
Finally, the Commission stands ready to propose to the Council to activate the general escape clause to accommodate a more general fiscal policy support.
[1] https://ec.europa.eu/info/sites/info/files/regulation-coronavirus-response-investment-initiative-march-2020_en.pdf
[2] https://ec.europa.eu/commission/presscorner/detail/en/ip_20_496
