Member states can spend and do whatever it takes to face the Coronavirus Crisis. The European Economy faces the COVID-19 global impact. EU suspends its strict budget rules on public deficits to allow EU Member States to do watever it needs to face the coronavirus pandemic. COVID19 has already killed thousands of Europeans.
EU suspends budget rules for first time
President Ursula von der Leyen said: Today we propose maximum flexibility for our rules which will allow our national governments to support everybody – their healthcare systems, staff as well as the people so severly affected by the crisis.
I want to make sure that we respond to the human as well as socio-economic dimension of the Coronavirus pandemic in the best way possible.
Ursula von der Leyen, President of the European Commission
EU commission tooks this temporary measure and activated the safeguard clause in the European Stability and Growth Pact. This decision will enable governments to “pump as much money as it takes into the system”
The coronavirus pandemic is a major shock for the European and global economies. Member States have already adopted or are adopting budgetary measures to increase the capacity of their health systems and provide relief to those citizens and sectors that are particularly impacted. These measures, together with the fall in economic activity, will contribute to substantially higher budgetary deficits.
Coronavirus Pandemic is a major shock
EU Commission calls on the Council to endorse its proposal as quickly as possible and believes EU finance ministers will approve the clause next week. The Commission stands ready to take further action as the situation evolves.
The European Commission and the Council have already clarified that the coronavirus pandemic qualifies as an “unusual event outside the control of government”. The Commission believes that more far-reaching flexibility under the SGP will protect European citizens and businesses from the consequences of this crisis and to support the economy following the pandemic. Therefore, the Commission decided to propose the activation of the general escape clause of the Stability and Growth Pact.
The proposal represents an important step in fulfilling the Commission’s commitment to use all economic policy tools at its disposal to support Member States’ in protecting their citizens and mitigating the pandemic’s severely negative socio-economic consequences.
This new Pandemic Emergency Purchase Programme (PEPP) will have an overall envelope of €750 billion. Purchases will be conducted until the end of 2020 and will include all the asset categories eligible. PEPP initiative will run under the existing asset purchase programme (APP). ECB will do everything necessary within its mandate.
ECB is fully prepared to provide tools for the Coronavirus crisis
European Central Bank is fully prepared to increase the size of its asset purchase programmes. EU Central Bank will adjust their composition, by as much as necessary and for as long as needed. It will explore all options and all contingencies to support the economy through this shock.
EU Member States have now all the tools at their disposal to make sure the European economy weathers the storm! It is therefore essential that we act decisively and collectively. We need to contain the spread of the virus, help patients and to counter the economic fallout.