February 28, 2021

The Eurogroup advises to keep the aid “as long as necessary”


Correspondent in Brussels

Updated:

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The finance ministers of the euro zone agreed yesterday that the measures to support the economy to help overcome the Covid-19 pandemic crisis They should be maintained “as long as necessary”, according to what its president, the Irishman Paschal Donohoe, told at the end of the virtual meeting of the Eurogroup, but they have to move from a generalized approach to a more specific one aimed at companies that are considered viable. Before the meeting, the Spanish Minister, Nadia calviñoHe announced that the Government hopes to be able to approve in March a package of direct aid to companies in which banks will be “part of the solution”, but for which it says it needs authorization from the European Commission.

Donohoe anticipated that “Towards summer” euro zone finance ministers will develop a common approach to budgetary action for what is expected to be the post-crisis period in 2022, including whether the escape clause of the stability pact remains in force or whether return and when to budget moderation and the control of the public deficit. Ministers agreed that as the recovery accelerates, governments would have to move from general support for all businesses to more specific and concrete measures targeted on a case-by-case basis. For now, no clear position has been taken, so the ministers will continue talks on how to handle the transition, including a more detailed discussion on how to identify viable companies that need more support and differentiate them from those that should be allowed to fail in an orderly manner.

The meeting of the ministers of Economy of the euro zone has counted for the first time with the participation of two experts from the World Health Organization in search of references on the ground when making economic forecasts. Those made by the Commission believe that in spring the trend could begin to reverse and start a path in the right direction so that it can be linked to the arrival of aid from the recovery fund. In spite of everything, Donohoe considered that the situation continues to be “very serious”, especially regarding employment, and therefore insisted that direct aid to the economy is still necessary and must be maintained “as long as it is necessary.”

In the minute that the ministers received, it is stated that without the support measures of the governments, 23% of European companies would have had liquidity problems at the end of 2020. Those that despite everything in December were already in a dramatic situation after consuming all the capital they had, varies according to the sectors, and ranges from electronics (8%) to hotels and restaurants (70% ). For this reason, the Commissioner for the Economy, Paolo Gentiloni, insisted that government policy should focus on “avoiding an increase in insolvencies in the future and withdrawing aid wisely. We must move from a global approach to targeted actions and a distinction must be made between companies that we consider to be not viable and others that are not. Efficient credit channels must be maintained, especially for the smaller ones and, for the non-viable ones, an organized end must be organized because social repercussions and employment must be our priority ”.

Infections and injections

Gentiloni also insisted that it is necessary “to win the race between infections and injections, because everything is an economic question and the success of vaccination it is critical to recovery. ” The commissioner said that he had explained to the ministers of the euro zone that in the forecasts published this Thursday it is understood that the confinement measures may be loosening from the middle of the second quarter until they vanish next year and that for now “we have to do everything what is necessary for this to happen. He also wanted to add a drop of optimism when he recalled that the impact of the recovery funds that have to inject money massively into the economy has not yet been integrated into the forecasts, “but our calculation tells us that we can expect an increase of two additional growth points and even more in the most affected countries » as it could be Spain.

However, before that, the Commission will present in March guidance to countries on how to prepare to apply your specific recommendations of spring that will already contain – and this time undoubtedly – the concrete reforms that will be required of each one to receive reconstruction funds. Until now, when referring to conditions, only the recommendations that the Commission had made in the last two years were discussed. outside the context of the pandemic, but now Commissioner Gentiloni has already warned that they will be clearly expressed so that governments can include them in next year’s budgets.

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