European Commission must not forget non-euro area and cohesion countries during crisis-management

On Monday evening Valdis Dombrovskis, Executive Vice-President of the European Commission and Paolo Gentiloni, Commissioner for Economy attended the remote meeting of European Parliament’s Committee on Economic and Monetary Affairs (ECON). The Commissioners and Members of the European Parliament (MEPs) exchanged views on the economic impact of the COVID-19 pandemic and the response to the crisis. According to Fidesz MEP Enikő Győri, the Commissioners had revealed very few details of the plans to be presented in May, however it was reassuring that they stood by maintaining and strengthening the cohesion policy, which is extremely important for Hungary.

Enikő Győri highlighted that according to the decision of the European Council last week, one of the three safety nets available from 1st June will create an unequal situation between the members of the euro area and the countries outside the zone. This is the European Stability Mechanism (ESM), which provides assistance to euro area countries in financial difficulties. Its applicability has been greatly facilitated due to the current crisis. In contrast, for non-euro area Member States, the available instrument is the so-called balance of payments assistance (BoP), which is not comparable in size or terms to the ESM reserved for euro area members. The Fidesz MEP reminded the Commissioners of their promise were made at the enlarged Eurogroup on 9th April, regarding that the Commission will make the BoP instrument more flexible, thus creating a level playing field for Member States. In his reply, Vice-President Dombrovskis assured MEP Győri that if a non-euro area Member State needed the instrument, the relaxed conditions would be applicable, as in the case of euro area Member States and the ESM.

MEP Győri also asked the Commissioners about the future relationship between the EU’s new long-term budget and the Recovery Fund proposed by last week’s European Council. MEP Győri stressed that the survival of the cohesion policy is crucially important: “We saw during the first days of the crisis that the Commission was able to mobilize cohesion funds the fastest. Cohesion policy must continue to support the strengthening of the common market, infrastructural catch-up and the development of our strategic autonomy. Both Commissioners agreed on the importance of the question raised and assured MEP Győri that cohesion policy would be one of the pillars of European reconstruction, remaining a mean of levering internal inequalities.

EPP MEP Győri asked the Commissioners to give special attention to small and medium-sized enterprises as well as family businesses when drawing up the new budget, especially within the InvestEU program. The request was supported by the Commissioners.

Finally, the MEP drew their attention to a serious moral dilemma. The absolute extent of the economic downturn should not be the only condition for determining the amount of grant a country can receive. “The distribution of crisis management resources should not reward irresponsible management or mismanagement of the epidemic. Good performance must not be financially punished”, reminded MEP Győri.

As Enikő Győri summed up the meeting, the Commissioners had so far revealed very little about the ideas to be presented on 6th May, how the EU’s redesigned Multiannual Financial Framework for 2021-2027 and how the new Recovery Fund will mitigate the effects of the crisis. The only takeaway is that the Commission plans to set up the Recovery Fund as part of the next long-term budget, containing both non-repayable grants and loan elements.