The acute respiratory syndrome 2019-nCov, known as “Covid-19” emerged in China at the end of 2019 and has rapidly extended on the globe, forcing the World Health Organisation to declare Covid-19 epidemics as a pandemic on 11 March 2020. The effects of the pandemic are numerous ranging from psychological and behavioral (e.g. fear and panics are sometimes induced in a disproportionate manner through the so called “fake news”) to the economical ones, respectively fiscal shocks on medium and long terms which affect the economy.
Neither of these effects should be neglected, these being correlated and producing a chain reaction. The economic effects are assessed on the long term while the governments take measures to alleviate the considerable impact of the pandemic. The European Commission (the “Commission”) has prepared a set of norms to counteract the effect which Covid-19 has over the member states. . As Romania is concerned, according to the information in media, Romania will receive 1 billion Euro from the European Commission to mitigate the effects of Covid-19 pandemics.
The Commission intends to use all instruments it has available in order to diminish certain economic effects of the pandemics, for natural persons (so that the incomes and the jobs are not affected in a disproportionate manner), as well as for the legal persons (supporting the legal persons by ensuring them that there is enough liquidity on the market to sustain the economies of the member states). In this sense, the Commission emphasizes the flexibility of the legal framework regarding the State Aid and of the Growth Pact Frameworks.
As regards the measures to protect the workers against the unemployment and the loss of jobs as a consequence of Covid-19 pandemics, the Commission makes the following proposals:
- supporting the member states by sustaining the programs of partial unemployment, professional reconversion which proved their efficacy in the past.
- preparing with celerity of the legislative proposal regarding the European system for unemployment reinsurance in order to assist the member states to preserve the jobs and competencies.
- Ensuring the mobilization of the European Social Fund, for encouraging the workers and the medical aid through the so-called Coronavirus Response Investment Initiative”).
- Using the European Globalisation Adjustment Fund for encouraging the dismissed and independent. For 2020, the available amount is 179 million EURO.
Regarding the available protection in the context of Covid-19 pandemics, the Commission ascertains the following:
- Observing the European framework regarding state aid, the member states may take measures to support SMEs which have economic difficulties due to Covid-19 pandemics.
- The support measures which the Member States may take are extensive and range from wage subsidies, suspension of the payment of the tax on profit, suspension of the VAT or of the social contributions.
- The legal framework of the state aid allows the member states to take measures to save the enterprises in need for urgent liquidity.
- The Commission emphasizes that it will redirect in the following period the amount of 1 billion Euro from the EU budget as a guarantee fo the European Investment Fund in order to stimulate the banking institutions to supply liquidity for SMEs and to enterprises with medium capitalisation.
- The Commission intends to offer the possibility to postpone the payments of the affected debtors, whose amounts became due.
- It is useful to mention the provisions of article 107 paragraph 2 letter (b) from the Treaty regarding the functioning of the European Union (“TFUE”) which establishes the compatibility with the internal market of the state aids with the purpose to redress the damages produced by natural calamities or by other extraordinary events. Our view is that a Covid-19 pandemic is an extraordinary event, triggering the applicability of the above mentioned legal provisions.
In the light of this extraordinary event, we believe that the domain of the state aid compatible with the European market, as those are regulated by the provisions of article 107 of the TFUE will have a more extensive applicability, the more so as certain member states as Germany, France and Poland have announced generous economic measures to sustain their economies.
Attention must be paid to the provisions of article 107 paragraph (3) letter (e) of the TFUE which entitles the Commission to suggest to the Council of the European Union other categories of state aid which may be granted in the European market.
In order to mitigate the effects of Covid-19 pandemics, the Commission published a proposal of regulation (the “Proposal”), amending the Regulation (EU) No 1303/2013 of the European Parliament and of the Council of 17 December 2013 laying down common provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund, the European Agricultural Fund for Rural Development and the European Maritime and Fisheries Fund and laying down general provisions on the European Regional Development Fund, the European Social Fund, the Cohesion Fund and the European Maritime and Fisheries Fund (“Regulation 1303”) and Regulation 508/2014 on the European Maritime and Fisheries Fund (“Regulation 508”).
Being a part of the Coronavirus Response Investment Initiative, the purpose of the Proposal is to mobilise the investments in the health sector as well as in any other economy sectors.. Thus, the Commission considers that the amounts allocated to the member states may be used to mitigate the consequences of the Covid-19 pandemics and to help the SMEs.
Therefore, the Commission aims to allocate the amount of 37 billion Euro through the Structural and Investment European Funds. In the first phase, the Commission suggests to the Council of the European Union and to the European Parliament to release the amount of 8 billion Euro in liquidity allocated to the member states affected by Covid-19 pandemics and to wave the request customary made to the member states to reimburse during 2020 the allocated funds which have not been used from the European Development Regional Fund („EDRF)” the European Social Fund, Cohesion Fund and Maritime and Fisheries Fund. These amounts may be used by the member states to accelerate the investments in respect of Covid-19 pandemics.
Moreover, the financial instruments which are financed through the above mentioned Funds will be designed to ensure the support for the working capital of the SMEs, as a temporary measure, if need may be.
The investment priority of the EDRF becomes the streghtening of research, technological and innovation so that the investments in products and services become adequate to respond to the crisis in the medical field. Such expenses should be elligible as of 1st February 2020.
The effects of Covid-19 pandemics are felt by worldwide economies. Largely, the impact thereof depends upon the measures taken by each member state, according to the economic and social priorities and necessities. The measures taken by the Commission should be seen as tool to mitigate the effects of Covid-19 pandemics.