The sheer speed by which Covid-19 has travelled and created havoc throughout the globe in only a matter of weeks explains the interconnectivity and interdependence of humanity and our economy. Tourism and hospitality establishments depend on the movement of people to travel for business or leisure purposes. The products we consume daily, including essentials such as food processing and medical supplies just to mention a few, are produced through complex international supply chains. These too, require efficient logistic services for transportation from and to different destinations worldwide.
Even as the economy is increasingly digitalized and provides us with more solutions for crisis management, Covid-19 taught us that people remain at the centre of economic activity and the wellbeing of society. Gratitude goes to everybody on the frontline, who with exceptional courage, is providing medical services to treat and prevent the spread of the virus, as well as those involved in live economic activities to ensure that vital goods and services on which we all depend remain available.
Meanwhile, a strong economic response was provided locally and in other EU member states through fiscal actions including tax deferrals, loan guarantees and wage subsidization schemes. This policy mix rightly gives a breathing space to several companies and sectors whose commercial activity was reduced at best or completely stalled at worse. This also gave a short- term lifeline to protect the jobs of thousands of workers during this phase of the crisis, which otherwise would have been impossible to retain. These measures will need to be prolonged and expanded to other sectors in the near future as the effect of the spill-over effect materializes into a significant number of our businesses on the brink of collapse.
The EU institutions have also stepped up at this time of crisis to provide financial resources and stabilize the European economy as much as possible. Measures such as the Commission’s ‘Corona Response Investment Initiative’ redirecting unspent EU structural funds to fight Covid-19 and the temporary support instrument SURE to mitigate unemployment risks during this emergency through preferential loans to member states; the European Central Bank’s asset purchase programme to stabilize the financial markets; guarantees by the European Investment Bank to mobilise funding for companies through national promotional banks and other financial intermediaries; the flexed EU state-aid rules to help companies in distress including airlines; and enabling the general escape clause of the Stability and Growth Pact to relax national budgetary rules. These, together with the contentious emergency fund agreed by the eurozone to be deployed via the European Stability Mechanism providing credit lines to members whose economies
are less resilient to this asymmetric shock, are all welcome initiatives.
Aside from financial measures, there is more that national Governments and the EU should continue doing in order to keep a sense of normality during the emergency, exit and recovery phase of the crisis.
Firstly, all member states should guarantee the integrity of the single market and observe the Commission’s ‘Green Lanes Initiative’ to ensure the flow of goods and services, which is crucial to maintain the supply chains particularly for essential goods across all parts of the EU. On its part the EU needs to be more vociferous at an international level on matters of external trade due to the concern of a growing number of countries that are taking unilateral measures to restrict or ban exports of certain essential products including medical equipment, pharmaceuticals and food. Europe needs to show leadership and secure coordinated responses in multilateral fora like the G20, the World Trade Organisation (WTO) and the Organisation for Eeconomic Co-operation and Development (OECD).
From a legislative perspective, considering the impact Covid-19 is having on the operational capacity of Governments’ administrations and private stakeholders, the EU should consider postponing or substantially extend deadlines for public consultations. The application dates of newly agreed rules should also be reviewed to avoid any additional burden on businesses during this sensitive time.
On a more practical level, once the peak of the medical crisis passes and Governments gradually phase out the current measures based on a risk-based approach in the medium-term, clear guidelines will need to be adopted for companies to provide healthy and safe conditions at the workplace for both workers as well as clients in general. This will not be a simple process, but an essential one to ensure that the business ecosystem returns to normality as soon as possible. Public authorities and business representative organisations must work together to ensure a successful transition.
It is also opportune for the EU and its member states to start thinking beyond the crisis and work on an ambitious EU recovery plan to give businesses the resources and confidence to invest. To start with, the need for a revised EU Budget for the period 2021-2027 balancing between a response to the current crisis and preserving the long-term EU objectives of transforming Europe towards a green and digital economy. The European Commission is expected to present a proposal by the end of April, and subsequently a swift agreement by member states is required to ensure that funds are ready to be deployed as soon as the next programming period comes into effect in 2021.
The last financial crisis a decade ago taught us that social inequality fuels nationalism and populism with serious risks for European integration; a project that has provided long lasting peace and collective prosperity. There is no doubt in my mind that Europe remains the best place to live, work and do business in. We must not allow this crisis to change this, which makes solidarity and responsibility more important than ever. European and national leaders need to stand up and be counted. They will be defined by the reforms actioned today to resolve and recover from the current crisis and to cushion future ones.
This article was first published on 19th April in the Sunday Times of Malta.