The COVID-19 pandemic has caused a major shock to the European and global economies. The COVID-19 crisis posed a challenge to the European economy and the livelihoods of EU citizens. During this health crisis, it was vital to protect the essential sectors of our economy, businesses and workers.
The Commission took immediate action to cushion the economic impact of the pandemic, both by authorising strong action by Member States and through economic emergency measures and initiatives to help workers and employers and support the economy during the crisis. While addressing immediate needs, the Commission has responded to the economic shock with an unprecedented recovery plan, with investments and reforms – the NextGenerationEU, which was adopted together with the multiannual EU budget for 2021-27.
Protecting businesses and jobs
The Commission put in place measures and instruments to protect jobs and workers affected by the COVID-19 pandemic.
European instrument for temporary Support to mitigate Unemployment Risks in an Emergency (SURE) to preserve workers’ income and sustain businesses.
Since 2020, it provided support for around 31.5 million employees and over 2.5 million firms in 19 beneficiary Member States.
EU measures to boost youth employment, empowering young people as drivers of a digital and green economy.
It has already resulted in a reinforced Youth Guarantee, a modernised European framework for vocational education and training, and a renewed impetus for apprenticeships. Since 2014, the Youth Guarantee scheme has helped over 36 million young people receive an offer of employment, continued education, apprenticeships and/or traineeships.
Turning the Pillar principles into tangible actions for citizens.
The Plan includes headline targets for the EU to achieve by 2030, namely employing at least 78% of people aged 20-64, ensuring 60% of all adults participate in training every year and reducing the number of people at risk of poverty or social exclusion by at least 15 million.
Protecting small and medium-sized businesses
The economic impacts of the coronavirus crisis on the European economy differed across industries and businesses.
To support the small and medium-sized enterprises (SMEs) – the backbone of the EU economy, the Commission put together a comprehensive package together with the European Investment Bank Group, backed by the European Fund for Strategic Investments (EFSI). For example, €714 million from the EFSI was redirected to the COSME Loan Guarantee Facility. This allowed the European Investment Fund (EIF) to incentivise banks to provide liquidity to SMEs affected by the coronavirus crisis. More flexibility was given to users of the Facility, and the guarantee rate was increased from 50 to 80%.
As of end December 2022, the support helped provide liquidity to over 180 000 small and medium-sized businesses across Europe, by incentivising local banks to provide more than €10 billion of liquidity finance under the COSME COVID measure.
Supporting regions and local communities through cohesion and investment
National, regional and local communities were on the frontline in countering the pandemic and its consequences. The Commission modified the rules of cohesion policy in a matter of weeks to provide additional flexibility, liquidity and simplification to the Member States through the two Coronavirus response investment initiatives, Coronavirus Response Investment Initiative (CRII) and Coronavirus Response Investment Initiative Plus (CRII+). Member States could re-allocate unspent cohesion policy funding to the sectors most in need – healthcare, business support and protection of vulnerable groups of people. The value of such actions reached €13 billion in just the first 6 months, increasing to €24 billion today. The measures contributed to keeping businesses afloat during lockdowns, providing hospitals with medical equipment and ensuring that people in disadvantaged situations received all the medical and social support they need.
The NextGenerationEU reinforced cohesion policy with additional €50 billion through the newly established REACT-EU to be spent on the recovery from the pandemic while paying special attention to green and digital priorities. REACT-EU contributed to re-launching businesses, advancing scientific research and development, and providing accessible education, training and job support to those in need. Within the first three months, the Commission had already approved over 80% of the available funding for 2021.
Long-term initiatives to support the recovery
In parallel to introducing measures to cushion the economic impact of the pandemic, the Commission proposed the NextGenerationEU package – the EU’s plan to emerge stronger and more resilient from the COVID-19 crisis.
The Recovery and Resilience Facility (RRF) is a temporary instrument that is the centrepiece of NextGenerationEU. Through the Facility, the Commission raises funds by borrowing on the capital markets (issuing bonds on behalf of the EU). These are then available to its Member States, to implement ambitious reforms and investments that:
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make their economies and societies more sustainable, resilient and prepared for the green and digital transitions, in line with the EU’s priorities;
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address the challenges identified in country-specific recommendations under the European Semester framework of economic and social policy coordination.
The RRF is also crucial for implementing the REPowerEU plan – the Commission’s response to the socio-economic hardships and global energy market disruption caused by Russia's invasion of Ukraine.
Both the multiannual EU budget and NextGeneration EU underpinned by Recovery and Resilience Facility (RRF) were adopted in December 2020. By August 2023, altogether €153 billion out of €723 billion (in 2022 prices) available under the Recovery and Resilience Facility have been disbursed.
Projects funded through RRF are bringing tangible results for economies of Member States and local communities in a wide range of areas including green and digital transition, social and territorial cohesion, sustainable and inclusive growth, resilience and policies for the next generation. Examples of the projects across all Member States are available on the RRF webpage.
On 19 March 2020, the Commission adopted the State aid COVID Temporary Framework to enable Member States to use the full flexibility foreseen under EU State aid rules to support the economy in the context of the coronavirus outbreak. The Temporary Framework enabled necessary and proportionate support by Member States to otherwise viable businesses that ended up in jeopardy because of the pandemic. Since its adoption, the Commission has approved over 1020 national schemes under the Temporary Framework, representing an estimated €3 trillion of approved State aid. In May 2022, it was announced that the State aid COVID Temporary Framework would not be extended beyond 30 June 2022, with some exceptions. These exceptions are investment and solvency support measures which will stay in place until 31 December 2023.
Flexibility under the EU Fiscal Rules
On 20 March 2020, the European Commission activated the general escape clause of the Stability and Growth Pact for the first time ever, as part of its strategy to quickly and forcefully respond to the coronavirus crisis. The general escape clause allowed Member States to undertake measures to deal adequately with the crisis, while departing from the budgetary requirements that would normally apply under the European fiscal framework.
The general escape clause will be deactivated at the end of 2023. The Commission Communication on the Spring Package of the European Semester in May 2022 stated that the conditions to deactivate the general escape clause would be considered met as of 2024. The Annual Sustainable Growth Survey of November 2022 confirmed this assessment, noting that the European economy is out of a period of severe economic downturn. It has recovered beyond its pre-pandemic level and has now weathered the acute phase of the energy price shock caused by Russia's war of aggression against Ukraine, although uncertainty remains high.