The EU’s economic response to the Covid-19 crisis: Was it too little too late or showing the right way forward?

On 9 April, EU Finance Ministers agreed to an economic crisis package worth around €540 billion, bringing Europe’s overall fiscal response to the crisis to an astonishing €3+ trillion.

And while it had for a long time looked as if the EU’s response would primarily be built on state aid guidance to allow member states to truly respond, the deal reached by Finance Ministers was a clear and strong message to Europe’s citizens, businesses and their employees that the EU stands side-by-side with them in the fight against the economic fall-out from the COVID-19 crisis.

The key pillars of the agreement

• A pan-European guarantee fund under the remit of the European Investment Bank (EIB) of €25 billion, which could support €200 billion of financing for companies with a focus on SMEs;

• a joint employment insurance fund worth €100 billion;

• and credit lines of approximately €240 billion coming from the European Stability Mechanism (ESM).

A critical step in the right direction

Continuing on this path of decisive action to stem the crisis will be critical to protecting European businesses and jobs across all sectors in the short and medium-term; it will also lay the foundation for ultimately jump-starting the much-needed recovery.

This is why we at Invest Europe, representing private equity, venture capital and infrastructure investment firms, as well as their investors, including some of Europe’s largest pension funds and insurers, applaud the agreed measures as an important step in the right direction. More steps need to follow, but this step was particularly important as it set the trajectory for getting Europe through this unprecedented crisis.

Time is a critical resource in this crisis

Over the past few weeks, the continent’s long-standing economic and financial divisions came again to the fore and risked delaying - if not derailing - the block’s common response to the crisis. Managing and mitigating the economic ramifications from the unprecedented economic shut-down is a race against the clock as the pandemic has no regard for procedures, principles or politics. The fact that agreement was found despite the often profound differences between EU member states, perhaps speaks to the severity of the situation as well as to the EU’s ability to act - even, or perhaps especially in times of crisis and much counter to the EU’s reputation.

With the lock-down severely hitting businesses across sectors and sizes throughout the continent, the measures taken are much needed and it will be vital to ensure that programmes and initiatives are being rolled-out efficiently and without delay. So, we urge national policy-makers to stand by the deal and to move rapidly to ensure that systems are up and running as soon as possible, so that start-ups and all European SMEs - irrespective of their ownership structure and size - can benefit from this forward leap quickly.

For more information, take a look at our recent press release.