EU states granted spending leeway to brace for Covid-19 economic hit

EU states granted spending leeway to brace for Covid-19 economic hit

Economic

Brussels, March 13, 2020 (dpa/NAN)  The European Commission is bracing for an EU economic downturn this year.

This was due to the new Coronavirus and will allow maximum flexibility on fiscal and state aid rules for EU capitals channeling relief to hospitals and businesses.

“It is a major shock for the global and for the European economy,’’ said EU executive chief Ursula von der Leyen on Friday.

“The shock is temporary, but we must work together to ensure that it is as short and as limited as possible,’’ she added.

EU capitals will be granted maximum flexibility to take all measures necessary to mitigate the socio-economic impact of the pandemic, according to von der Leyen.

The EU executive estimates it is very likely that the growth rate of Gross Domestic Product (GDP) in the European Union and euro currency area falls below zero or considerably below zero per cent, a senior official said Friday.

The latest official economic forecast for the European Union predicted GDP growth of 1.4 per cent in 2020, but was based on data gathered before Covid-19 gripped Europe.

The new figure is only an estimate, the official stressed, since there is no hard data available for a full forecast.

In the past days, a spate of EU countries has closed shops, schools and restaurants, or even sealed off their borders in an attempt to slow the spread of the respiratory disease Covid-19.

Close to 5,000 deaths have been reported in Europe at the latest count.

The crisis is putting enormous strain on EU national healthcare systems as well as the retail, transport and tourism sectors.

“The Coronavirus pandemic is testing us all,’’ von der Leyen said.

“This is not only an unprecedented challenge for our healthcare systems, but also a major shock for our economies.’’

Relaxing state aid rules means that national governments can help ailing companies or pay out compensation to consumers without fear of retribution from the European Commission, which normally enforces the competition regulations.

According to a statement from the commission, the 27 EU member states will also be allowed exceptional spending to contain the Covid-19 outbreak such as health care expenditure and targeted relief measures for firms and workers.

EU fiscal rules could even be suspended altogether in the case of a severe economic downturn caused by the Covid-19 pandemic, EU executive vice president Valdis Dombrovskis said.

This would require the agreement of EU leaders, he added. (dpa/NAN)

HS/MST

Edited by Halima Sheji/Muhammad Suleiman Tola