May 14, 2020 |
With the current fast-changing developments, policy makers need to know what is happening to the economy in real time, but they often must settle for data telling them what happened many weeks ago. And international trade, which links countries through a complex web of supply chains, is an area where timely information is especially valuable from a global perspective.
Most trade takes place by sea, and—for navigational safety purposes—virtually all cargo ships report their position, speed, and other information many times a day. A new IMF methodology using these data can help better inform us how international trade is affected by the COVID-19 pandemic.
Building on machine-learning techniques, we can provide better answers to simple questions such as: How big is the drop in trade activity? Should it be attributed mostly to exports or to imports?
A new approach
Using over one billion messages from ships over a period of five years, the newly-developed methodology closely replicates official trade statistics for many countries and for the world in aggregate. It is available at a daily frequency in real time, while official statistics are typically delayed by many weeks. At the global level, our indicators built from ships’ radio signals closely approximate monthly official trade statistics (with a correlation of nearly 0.9 in levels, and around 0.4 in quarter-on-quarter growth rates).
The top panel of our Chart of the Week shows a dramatic fall in Chinese exports in the wake of initial lockdown measures to contain the spread of the virus. Exports resumed in early to mid-March, though in late-April the recovery remained incomplete and showed renewed signs of weakness.
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AUTHORS:
• Diego Cerdeiro, Andras Komaromi, Yang Liu, and Mamoon Saeed
Compliments of the IMF.

May 30, 2020 | Statement by the President of the Commission Ursula von der Leyen and High Representative/ Vice-President Josep Borrell
As the world continues to fight the COVID-19 pandemic, the main task for everyone is to save lives and contain and mitigate this pandemic. The European Union continues to support the WHO in this regard and has already provided additional funding.
In an EU-led resolution adopted by consensus on 19 May at the World Health Assembly, all WHO Member States agreed to initiate, at the earliest appropriate moment, an impartial, independent and comprehensive evaluation to review lessons learnt from the international health response to the coronavirus, notably with the objective of strengthening future global health security preparedness.
Evaluating our global response is necessary as there are lessons to be learnt from this pandemic, its outbreak and response to it. The evaluation of our collective performance at international level is only a necessary process, aiming at strengthening health security.
Global cooperation and solidarity through multilateral efforts are the only effective and viable avenues to win this battle the world is facing. The WHO needs to continue being able to lead the international response to pandemics, current and future. For this, the participation and support of all is required and very much needed. In the face of this global threat, now is the time for enhanced cooperation and common solutions. Actions that weaken international results must be avoided. In this context, we urge the US to reconsider its announced decision.
Compliments of the European Commission.

May 29, 2020 |
Why do we need InvestEU for the post-coronavirus recovery?
InvestEU is the EU’s proposed flagship investment programme to kick-start the European economy. It is well-placed to provide long-term funding and to support Union policies in the recovery from a deep economic and social crisis. This has been shown with the successful implementation of the European Fund for Strategic Investments and other EU financial instruments in the wake of the past financial crisis.
In the current coronavirus crisis, the market allocation of financial resources is not fully efficient and perceived risk impairs private investment significantly. Deep uncertainty currently compromises the quality of financial market information and lenders’ ability to assess the viability of companies and investment projects. If left unchecked, this can create pervasive risk aversion towards private investment projects and contribute to a ‘credit crunch’. Under such circumstances, the key feature of InvestEU of de-risking projects to crowd in private finance is particularly valuable and should be utilised.
An enhanced InvestEU programme thanks to Next Generation EU will be able to provide crucial support to companies and to ensure a strong focus of investors on the Union’s medium- and long-term policy priorities, such as the European Green Deal and the digitalisation transition and greater resilience. To address all of these challenges, the Commission is updating its original InvestEU proposal from 2018 to make sure it can better respond tothe current economic crisis.
What are the main changes to InvestEU?
The new proposal contains two main changes to the InvestEU Programme as partially agreed between co-legislators in April 2019:
• An increase of the InvestEU budget to reflect the higher investment needs and an environment of increased risk. The financial envelope for the sustainable infrastructure window is doubled, in line with the President’s Communication “Europe’s moment: Repair and Prepare for the Next Generation”.
• A broadened scope through the addition of a fifth window – the strategic European investment window – in order to cater for the future needs of the European economy and to promote and secure EU strategic autonomy in key sectors.
What will the new strategic European investment window finance?
The outbreak of the pandemic has shown the interconnectivity of global supply chains and exposed some vulnerabilities, such as the over-reliance of strategic industries on non-diversified external supply sources. Such vulnerabilities need to be addressed, to improve the Union’s emergency response as well as the resilience of the entire economy, while maintaining its openness to competition and trade in line with its rules. The new strategic European investment windowwill focus on building stronger European value chains in line with the strategic agenda of the Union and the New Industrial Strategy for Europe, as well as supporting activities in critical infrastructure and technologies
This reinforcement is of particular importance in the post-crisis situation, as some Member States might not have sufficient financial capacity to support these projects with national State aid. Moreover, many of these projects are cross-border and require a European approach.
How will the new window complement the pre-existing windows?
In the current context, the strategic European investment window would bring value added to the original windows, as it focuses on recipients or projects based on their high European strategic importance.
The new window would both target specific projects (e.g. supporting large consortia or public-private partnerships aimed at developing a specific technology and building critical infrastructure) and provide diffused financing, for instance by supporting the emergence of whole ecosystems of entrepreneurs active in the targeted sectors (e.g. innovative SMEs working on technologies of potential relevance to industrial biotechnology and pharmaceuticals).
The additionality requirements under this window would also differ from those envisaged for the other windows. For instance, the additionality of the support under the new window to large corporates would be in maintaining and developing their production within the Union or under the control of European investors and in scaling up the deployment of innovative technologies, rather than in purely risk-related considerations of the InvestEU support.
What are the changes in budgetary terms[1]?
The new proposal foresees an increase of the original financial envelope. This includes a doubling of the guarantee amount allocated to the sustainable infrastructure window under the InvestEU Fund as well as the allocation of an additional guarantee amount to the new window. More concretely:
• Sustainable infrastructure window: €20 bn• Research, innovation and digitisation window: €10 bn
• SME window: €10 bn
• Social investment and skills window: €3.6 bn
• Strategic European investment window: €31 bn
The new proposal also foresees an increase of the financial envelope allocated to the InvestEU Advisory Hub by an amount of €200 million to cater for the needs of the new window as well as the increasing needs of the other four windows.
How will InvestEU work?
The main principle of how InvestEU will function does not change. The InvestEU Fund will mobilise public and private investment through an EU budget guarantee of €75 billion that will back the investment projects of implementing partners such as the European Investment Bank (EIB) Group and others, and increase their risk-bearing capacity.
Under the new proposal, the guarantee will be provisioned at 45%, meaning that €34 billion of the EU budget is set aside in case calls are made on the guarantee. The size of the provisioning is based on the type of envisaged financial products and the riskiness of the portfolios, taking into account the experience under the EFSI and current financial instruments, as well as the likely changes in market circumstances following the coronavirus crisis.
What is the role of the EIB Group in the new proposal?
Given its role under the Treaties, its capacity to operate in all Member States and the existing experience under the current financial instruments and the EFSI, the European Investment Bank Group will remain a privileged implementing partner for the InvestEU. It will implement 75% of the EU guarantee.
The EIB Group will also play a central role in implementing advisory support under the InvestEU Advisory Hub. Moreover, it will advise the Commission and perform operational tasks in relation to the Hub.
Is the new window open to other implementing partners than the EIB Group?
Yes. The new window is open to other implementing partners than the EIB Group, including national promotional banks and institutions, as well as international financial institutions such as the European Bank for Reconstruction and Development or the Council of Europe Development Bank.
The Commission will continue the discussions with potential implementing partners to ensure a swift and efficient deployment of the instrument, which is even more crucial under the current circumstances.
Are there any changes to the InvestEU governance?
An Investment Committee composed of independent experts will remain responsible for approving the individual requests. As the Investment Committee will operate in different configurations corresponding to the InvestEU policy windows, a fifth configuration has been added to the proposal.
Are there any changes to the InvestEU eligibility criteria?
The policy areas eligible for financing and investment operations under the existing four windows remain the same as proposed and negotiated in annex II to  the InvestEU Regulation. However, for the strategic European investment window, new intervention areas are introduced, as referenced above.
In case a financing or investment operation proposed to the Investment Committee falls under more than one policy window, it will be attributed to the policy window under which its main objective or the main objective of most of its sub-projects falls. The Investment Guidelines will specify the criteria for the allocation of financial products (under which financing and investment operations will be submitted) to specific windows.
For more information
Factsheet: An enhanced InvestEU Programme and Strategic Investment Facility
Proposals: EU long-term budget 2021-2027: Commission Proposal May 2020
Compliments of the European Commission.

May 29, 2020 |
As announced by European Commission President von der Leyen on 27 May 2020, the Commission is aiming to kick-start the EU economy by incentivising private investments. The Commission today proposes a new Solvency Support Instrument, which builds on the existing European Fund for Strategic Investments, to mobilise private resources to urgently support viable European companies in the sectors, regions and countries most economically impacted by the pandemic. The Solvency Support Instrument can be operational from 2020 and will have a budget of €31 billion, aiming to unlock €300 billion in solvency support for otherwise healthy companies from all economic sectors and prepare them for a cleaner, digital and resilient future. The Commission is enhancing InvestEU, Europe’s flagship investment programme, to a level of €15.3 billion to mobilise private investment in projects across the Union. Finally, the Commission is proposing a new Strategic Investment Facility built into InvestEU, to generate investments of up to €150 billion, thanks to a contribution of €15 billion from Next Generation EU, to boost the resilience of strategic sectors, notably those linked to the green and digital transition, and key value chains in the internal market. For more details see the Q&A and factsheet on the Solvency Support Instrument; and the Q&A and factsheet on InvestEU. All legal texts related to the new MFF proposal are available here.
Compliments of the European Commission.

Together with our members we are creating a Video series of first-hand accounts of the Pandemic’s impact, both personally & professionally.
We invite you to join us today for a first-hand look at the impact of the global shutdown following the Coronavirus (COVID-19) outbreak – Today we are featuring Annika Rembe, Consul General, Consulate General of Sweden a EACCNY member.The questions we asked our members for this series are:1) What are some challenges you, personally and your organization have faced?2) What are some of the most surprising (positive, innovative) responses/changes you have witnessed?3) How will this experience change us going forward, as a society and in terms of how we do business?

EACCNY has its finger on the pulse of how this worldwide pandemic is effecting companies and organizations on both sides of the Atlantic. EACC is where Americans & Europeans connect to do business.
Stay tuned for more on this series! We hope you enjoy these short vignettes our members and friends of the EACC created to share their experience.

May 28, 2020 | By Tao Zhang, Deputy Managing Director, IMF
“As Prepared for Delivery”
I thank Minister Annamuhammedov and Ms. Elena Panova for their kind invitation to participate in this conference. It is not accidental that this conference is taking place in Ashgabat. Turkmenistan was one of the first countries to have formally accepted all Sustainable Development Goals developed by the United Nations and has been integrating these goals into its national plans for socio-economic development.
Achieving SDGs is an important priority for emerging markets and developing countries. Significant progress has already been made in the Caucasus and Central Asia region in this area. Yet there is still a lot more to be done. The COVID-19 pandemic has made the task of achieving SDGs even more urgent and challenging.
Before the COVID pandemic, we knew that financing the required scale-up of spending for reaching the SDGs was a challenge. An IMF study showed that the additional spending required for meaningful progress in the areas of health, education, and selected infrastructure was quite large. For emerging market economies, the additional annual spending reached an estimated 4 percentage points of their combined GDP in 2030, compared to 15 percentage points of GDP for low-income developing countries. Looking specifically at the CCA region, our estimates indicate that the additional annual spending required for countries represented here reach about 10 percentage points of their GDP in 2030. Substantial external resources are needed when domestic efforts—for instance, mobilizing tax revenues and enhancing spending efficiency—are not enough for financing the SDGs.
The human and economic impact of COVID 19 pandemic makes spending needs larger and SDG financing more challenging. The crisis risks setting back previous achievements in human and social developments such as equality and poverty reduction. Health and social spending needs increase as countries respond to the emergency. With revenue losses and higher debt in many countries, fiscal space is shrinking. The crisis also highlights underlying structural shortcomings in some cases such as limited social safety net to adequately protect those at a higher risk of falling into poverty and uneven access to quality public services by different groups in the population.
The COVID recovery presents opportunities to accelerate the necessary reforms for achieving SDGs. Under the current difficult circumstances, increasing the efficiency of public spending to achieve savings and ensure spending is allocated to areas where it is most needed, including health, education and infrastructure, is of crucial importance. To spend efficiently, countries must develop political and societal consensus, work on building strong institutions, and instill principles like transparency, accountability, and responsiveness. Business friendly environment must be created to engage the private sector.
The IMF, with its expertise in macroeconomic and financial issues and its global membership, supports the development efforts of its member countries and promotes global economic and financial stability. The IMF has launched a number of initiatives to support countries’ response to COVID while continuing support to member countries as they pursue the SDGs. These include increased financial support for low-income developing countries—as of May 20, we have provided more than 16 billion of SDRs via emergency financing facilities to 59 countries; bolstering support to fragile and conflict states to address their unique challenges; and enhanced policy advice and capacity building on measures to promote inclusion and sustainable macroeconomic environment.
Financing for SDG also calls for global and regional cooperation. While countries must own the responsibility for achieving the SDGs, the private sector, official development assistance, philanthropists, and international financing institutions can help accelerate the efforts to close the remaining gap.
This conference is focusing on crucial issues and is taking place at a difficult juncture. I wish the organizers and participants every success in this event.
Compliments of the IMF.

The coronavirus pandemic has claimed thousands of lives and put health systems under enormous strain. The Commission’s immediate priority is fighting the virus and mitigating the socio-economic consequences of the pandemic. At the same time, we must start looking ahead so that Member States can gradually lift their containment measures, with a view to entering the recovery phase and revitalising our societies and economy.
While there is no one-size-fits-all approach to a gradual, science-based and effective lifting of containment measures, a highly coordinated way forward is a matter of common European interest.
Responding to the call of the European Council of 26 March, the Commission, in cooperation with the President of the European Council, has put forward a European roadmap towards lifting coronavirus containment measures. It takes into account the expertise of the European Centre for Disease Prevention and Control the Commission’s Advisory Panel on the coronavirus, experience of Member States and guidance from the World Health Organization. Evidently, any such reflection is based on the scientific knowledge available today, and should be revised as further evidence appears.
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Compliments of the European Commission.

May 27, 2020 |
Today, the European Commission has put forward its proposal for a major recovery plan. To ensure the recovery is sustainable, even, inclusive and fair for all Member States, the European Commission is proposing to create a new recovery instrument, Next Generation EU, embedded within a powerful, modern and revamped long-term EU budget. The Commission has also unveiled its adjusted Work Programme for 2020, which will prioritise the actions needed to propel Europe’s recovery and resilience.
The coronavirus has shaken Europe and the world to its core, testing healthcare and welfare systems, our societies and economies and our way of living and working together. To protect lives and livelihoods, repair the Single Market, as well as to build a lasting and prosperous recovery, the European Commission is proposing to harness the full potential of the EU budget. Next Generation EU of €750 billion as well as targeted reinforcements to the long-term EU budget for 2021-2027 will bring the total financial firepower of the EU budget to €1.85 trillion.
European Commission President Ursula von der Leyen said: “The recovery plan turns the immense challenge we face into an opportunity, not only by supporting the recovery but also by investing in our future: the European Green Deal and digitalization will boost jobs and growth, the resilience of our societies and the health of our environment. This is Europe’s moment. Our willingness to act must live up to the challenges we are all facing. With Next Generation EU we are providing an ambitious answer.”
Commissioner Johannes Hahn, in charge of the EU budget, said: “Our common budget is at the heart of Europe’s recovery plan. The additional firepower of Next Generation EU and the reinforced multiannual financial framework will give us the power of solidarity to support Member States and the economy. Together, Europe will arise more competitive, resilient and sovereign.”
Vice-President Maroš Šefčovič, in charge of interinstitutional relations and foresight, said: “The recovery will need strong policy direction. The adapted Work Programme, reflecting the new reality, shows that we will focus all our actions on overcoming the crisis, jumpstarting our economy and putting the European Union firmly on a resilient, sustainable and fair recovery path. It will help us rebound stronger.”
INVESTING FOR THE NEXT GENERATION
Complementing national efforts, the EU budget is uniquely placed to power a fair socio-economic recovery, repair and revitalise the Single Market, to guarantee a level playing field, and support the urgent investments, in particular in the green and digital transitions, which hold the key to Europe’s future prosperity and resilience.
Next Generation EU will raise money by temporarily lifting the own resources ceiling to 2.00% of EU Gross National Income, allowing the Commission to use its strong credit rating to borrow €750 billion on the financial markets. This additional funding will be channelled through EU programmes and repaid over a long period of time throughout future EU budgets – not before 2028 and not after 2058. To help do this in a fair and shared way, the Commission proposes a number of new own resources. In addition, in order to make funds available as soon as possible to respond to the most pressing needs, the Commission proposes to amend the current multiannual financial framework 2014-2020 to make an additional €11.5 billion in funding available already in 2020.
The money raised for Next Generation EU will be invested across three pillars:
1. Support to Member States with investments and reforms:
• A new Recovery and Resilience Facility of €560 billion will offer financial support for investments and reforms, including in relation to the green and digital transitions and the resilience of national economies, linking these to the EU priorities. This facility will be embedded in the European Semester. It will be equipped with a grant facility of up to €310 billion and will be able to make up to €250 billion available in loans. Support will be available to all Member States but concentrated on the most affected and where resilience needs are the greatest.• A €55 billion top-up of the current cohesion policy programmes between now and 2022 under the new REACT-EU initiative to be allocated based on the severity of the socio-economic impacts of the crisis, including the level of youth unemployment and the relative prosperity of Member States. 
• A proposal to strenghten the Just Transition Fund up to €40 billion, toassist Member States in accelerating the transition towards climate neutrality.
• A €15 billion reinforcement for theEuropean Agricultural Fund for Rural Development to support rural areas in making the structural changes necessary in line with the European Green Deal and achieving the ambitious targets in line with the new biodiversity and Farm to Fork strategies.
2. Kick-starting the EU economy by incentivising private investments:
• A new Solvency Support Instrument will mobilise private resources to urgently support viable European companies in the sectors, regions and countries most affected. It can be operational from 2020 and will have a budget of €31 billion, aiming to unlock €300 billion in solvency support for companies from all economic sectors and prepare them for a cleaner, digital and resilient future.• Upgrade InvestEU, Europe’s flagship investment programme, to a level of €15.3 billion to mobilise private investment in projects across the Union.
• A new Strategic Investment Facility built into InvestEU– to generate investments of up to €150 billion in boosting the resilience of strategic sectors, notably those linked to the green and digital transition, and key value chains in the internal market, thanks to a contribution of €15 billion from Next Generation EU.
3. Addressing the lessons of the crisis:
• A new Health Programme, EU4Health, to strengthen health security and prepare for future health crises with a budget of €9.4 billion.• A €2 billion reinforcement of rescEU, the Union’s Civil Protection Mechanism, which will be expanded and strenghetend to equip the Union to prepare for and respond to future crises.
• An amount of EUR€94.4 billion forHorizon Europe, which will be reinforced to fund vital research in health, resilience and the green and digital transitions.
• Supporting Europe’s global partners through an additional €16.5 billion for external action, including humanitarian aid.
• Other EU programmes will be strengthened to align the future financial framework fully with recovery needs and strategic priorities. Other instruments will be reinforced to make the EU budget more flexible and responsive.
Reaching a rapid political agreement on Next Generation EUand the overall EU budget for 2021-2027 at the level of the European Council by July is necessary to give new dynamism to the recovery and equip the EU with a powerful tool to get the economy back on its feet and build for the future.
THE POLICY FUNDAMENTALS OF THE RECOVERY
Relaunching the economy does not mean going back to the status quo before the crisis, but bouncing forward. We must repair the short-term damage from the crisis in a way that also invests in our long-term future. All of the money raised through Next Generation EU will be channelled through EU programmes in the revamped long-term EU budget:
The European Green Deal as the EU’s recovery strategy:
• A massive renovation wave of our buildings and infrastructure and a more circular economy, bringing local jobs;
• Rolling out renewable energy projects, especially wind, solar and kick-starting a clean hydrogen economy in Europe;
• Cleaner transport and logistics, including the installation of one million charging points for electric vehicles and a boost for rail travel and clean mobility in our cities and regions;
• Strengthening the Just Transition Fund to support re-skilling, helping businesses create new economic opportunities.
Strengthening the Single Market and adapting it to the digital age:  
• Investing in more and better connectivity, especially in the rapid deployment of 5G networks;
• A stronger industrial and technological presence in strategic sectors, including artificial intelligence, cybersecurity, supercomputing and cloud;
• Building a real data economy as a motor for innovation and job creation;
• Increased cyber resilience.
A fair and inclusive recovery for all:
• The short-term European Unemployment Reinsurance Scheme (SURE) will provide €100 billion to support workers and businesses;
• A Skills Agenda for Europe and a Digital Education Action Plan will ensure digital skills for all EU citizens;
• Fair minimum wages and binding pay transparency measures will help vulnerable workers, particularly women;
• The European Commission is stepping up the fight against tax evasion and this will help Member States generate revenue.
BUILDING A MORE RESILIENT EU
Europe must enhance its strategic autonomy in a number of specific areas, including in strategic value chains and reinforced screening of foreign direct investment. To increase crisis preparedness and crisis management, the Commission will reinforce the European Medicines Agency and give a stronger role to the European Centre for Disease Control (ECDC) in coordinating medical responses in crises.
The recovery must unequivocally be based on fundamental rights and full respect of the rule of law. Any emergency measures must be limited in time and be strictly proportionate. The Commission’s assessment will be included in the first report under the rule of law mechanism.
We can and must learn the lessons from this crisis, but this can only be done by involving our citizens, communities and cities. The Conference on the Future of Europe will play an important role in further strengthening Europe’s democratic foundations in the post-coronavirus crisis world.
RESPONSIBLE GLOBAL LEADERSHIP
The EU is committed in leading international efforts towards a truly global recovery, notably though joint coordination with the United Nations, the G20 and G7, the International Monetary Fund, the World Bank or the International Labour Organisation. The EU will continue working particularly closely with its immediate neighbourhood in the East and South and its partners in Africa.
BACKGROUND
The Joint Statement of the Members of the European Council adopted on 26 March 2020 called on the European Commission to develop a coordinated exit strategy, a comprehensive recovery plan and unprecedented investment to allow a normal functioning of our societies and economies and get to sustainable growth, integrating inter alia the green transition and the digital transformation. On the basis of this mandate, on 15 April the Presidents of the Commission and the Council presented, as a first step, a Joint European Roadmap towards lifting Covid-19 containment measures. The package presented today, based on a revamped proposal for the next long-term EU budget and the updated Commission Work Programme for 2020, addresses the second part of the mandate, namely the need for a comprehensive recovery plan.
The EU has already delivered a coordinated and powerful collective response to cushion the economic blow of the coronavirus crisis. We have relaxed our fiscal and state aid frameworks to give Member States room to act. We are using every available euro in the EU budget to support the healthcare sector, workers and businesses, and mobilising finance from the markets to help save jobs.
Compliments of the European Commission.

May 26, 2020 |
• Pandemic greatly amplified existing vulnerabilities of the financial sector, corporates and sovereigns
• Policy responses to pandemic essential to preserve financial stability
• Euro area banks, although now better capitalised, likely to face significant losses and further pressure on profitability
Despite the immense social and economic disruption in the wake of the coronavirus (COVID-19) pandemic, decisive policy responses have helped to prevent a seizing-up of the financial system. However, even as infection rates fall in many countries, the impact on the economy and markets has unearthed and increased existing vulnerabilities for euro area financial stability, according to the May 2020 Financial Stability Review (FSR) of the European Central Bank (ECB). Financial stability risks could arise as these vulnerabilities, identified in earlier issues, interact with the pandemic. These include richly valued asset prices, fragile investment funds, the sustainability of sovereign and corporate debt, and weak bank profitability.
“The pandemic has caused one of the sharpest economic contractions in recent history, but wide-ranging policy measures have averted a financial meltdown”, ECB Vice-President Luis de Guindos said. “However, the repercussions of the pandemic on bank profitability prospects and medium-term public finances will need to be addressed so that our financial system can continue to support the economic recovery”, he added.
As the virus spread globally in late February, financial markets saw dramatic falls in asset prices, sharp increases in volatility, illiquidity in some core markets and a general tightening of financial conditions. Some market reactions were amplified by the need for investment funds to sell assets to meet large outflows. Action by central banks globally, notably the ECB’s announcements of large-scale asset purchases (under the public sector purchase programme and the pandemic emergency purchase programme), helped stabilise conditions in markets.
All euro area countries announced fiscal packages to cushion the economic ramifications of the crisis for households and companies. These fiscal measures should support the economic recovery. In particular, they could help the many corporates which are now facing cash-flow strains. Some riskier firms, which had levered up in recent years, are likely to face additional challenges. Looking ahead, the associated increase in public debt levels could also trigger a reassessment of sovereign risk by market participants and reignite pressures on more vulnerable sovereigns.
Although supported by a significant increase in capital and liquidity since the global financial crisis, bank valuations fell to record lows and funding costs increased. This reflected both the deterioration in economic prospects and considerably higher uncertainty about the outlook for euro area banks’ profits and asset quality. Mirroring changes in corporate earnings expectations and weaker income generation on new business, the return on equity for euro area banks in 2020 is now expected to be significantly lower than it was before the pandemic.
Banks should benefit from the action of prudential authorities across the euro area to ease capital requirements and grant banks more operational flexibility to maintain the flow of credit to the economy. In addition, ECB Banking Supervision recommended that banks temporarily refrain from paying dividends or buying back shares, strengthening their capacity to absorb losses and avoid deleveraging. These capital measures are expected to remain in place until the economic recovery is well established.
This issue of the FSR also contains a number of boxes and special features touching on aspects of both recent developments and other important vulnerabilities, including on the potential impact of government loan guarantee schemes (Box 4), bank dividend payout suspensions (Box 5), bank and non-bank interlinkages (Box 6), and the macroeconomic impact of financial policy measures (Box 8).
Compliments of the European Central Bank.

May 26, 2020 |
Main results
Ministers held an exchange of views on a comprehensive approach to the COVID-19 pandemic, including the de-escalation of containment measures and economic recovery.
They were invited to share their experiences and provide comments on how to gradually lift restrictions related to COVID-19 and restart the economy and social activities, taking into account the health considerations.
Ministers outlined their national measures and timelines, stressing the importance of continued cooperation between member states, as well as ensuring a proportionate and non-discriminatory approach when lifting the restrictions and opening the borders.
The European Union must continue with a comprehensive and coordinated approach to the de-escalation of containment measures. We should carefully strike a balance between resuming economic and social activities and protecting the health of our citizens. We should jointly create the conditions for a speedy exit from the crisis and the economic recovery of all member states. – Andreja Metelko-Zgombić, Croatian State Secretary for European Affairs
Ministers also provided their views on a comprehensive economic and social recovery of the EU. They outlined their expectations regarding adjustments to the next multiannual financial framework to take into account the new realities and as regards the planned recovery fund.
A number of key areas of action were mentioned in the discussion, such as strengthening the single market whilst ensuring a level playing field, supporting cohesion and convergence, green transition and digital transformation, and enhancing the EU’s strategic autonomy.
Several speakers pointed out that the Conference on the Future of Europe would be relevant for discussing with EU citizens and other stakeholders the challenges facing the EU in the medium and long term, including the lessons learned from the COVID-19 crisis. The presidency highlighted that its aim is to find an agreement on the Council’s position on the conference as soon as possible and to engage on this basis with the Commission and the European Parliament.
Under ‘any other business’, the Commission informed ministers about the state of play in the preparation of the first annual report on the rule of law in the EU, planned for September. It underlined that the report remains a priority for the Commission and that preparations are well on track despite the difficult circumstances. The aim is to ensure objectivity and an equal treatment of all member states.
Compliments of the European Council.