EU redirects $39B to counter economic fallout

BRUSSELS

The European Commission on Friday announced to redirect €35 billion ($39 billion) funds to counter the economic fallout due to coronavirus.

This amount from unused cohesion funds will be used to support healthcare and suffering European businesses. Of this €8 billion ($ 8.9 billion) will be immediately available.

The European Parliament and the Council of the European Union representing the member states are expected to give the green light to the measures in the upcoming two weeks.

“Slowing down the spread of the virus implies slowing down public life and economic activity,” said Ursula von der Leyen, president of the European Commission, at a news conference.

The February economic forecast predicting 1.4% gross domestic product (GDP) growth for the bloc is already outdated.

Marteen Verwey, the European Commission’s director-general responsible for economic and financial affairs, said the index may fall below zero.

In order to tackle the economic consequences of the coronavirus, the European Commission will authorize member states to subsidize sectors that suffer the heaviest loss.

These measures make an exception in EU competition policy which aims at preventing member states from creating distortions in the market by supporting certain companies.

Under the new rules, European countries can reimburse the loss of businesses, create direct state support schemes or capitalize banks to provide urgent liquidity support for companies in need due to the economic consequences of the virus.

Tourism, transport, restaurants are considered as main recipients of these interventions.

State subsidies and healthcare spending may increase public expenditure, said Valdis Dobrovskis, EU commissioner for economy.

The virus-related expenditures will be taken into consideration by the counting of structural balances of EU member states, so that they can still meet the bloc’s budgetary disciplinary rules.

The coronavirus outbreak has brought major cities across Europe to a virtual standstill, with Italy coming out as the worst hit.

After emerging in Wuhan, China last December, the virus, officially known as COVID-19, has spread to at least 123 countries and territories.

The global death toll is now nearly 5,000, with more than 132,500 confirmed cases, according to the World Health Organization, which declared the outbreak a pandemic.

A vast majority of those who become infected recover from the illness.