Covid-19 recovery plan – European Commission proposes wide-sweeping measures

Tarek Tranberg,
Head of Public Affairs & Policy for the European Association of Corporate Treasurers (EACT)


Shortly after the Covid-19 pandemic spread across the EU, an initial set of measures was proposed by the European Commission proposed and approved by Member State in the Council of the EU, including the activation of the European Stability Mechanism to provide credit lines to individual Member States, support for European Investment Bank lending schemes to ailing companies, as well as an EU unemployment insurance scheme called SURE that provide financial support to Member States who have launched furlough schemes.

In parallel the European Central Bank (ECB) has adopted further measures of ultra-loose monetary policy to support the Eurozone economy in an attempt to cushion the impact of widespread lockdown measures across many countries and affecting all sectors of the economy.

With the spread of the pandemic receding slowly in recent weeks, the focus of EU policymakers has now turned to proposing, and adopting swiftly, sweeping recovery measures to support individual Member States in bouncing back from the most severe economic recession on record.

Whilst a large number of individual Member States have launched national fiscal support measures of varying sizes, depending on the national fiscal headroom, EU policymakers have been very clear that any recovery would need to be coherent across the whole of the EU to preserve the integrity and the proper functioning of the EU’s single market.

To that end, the European Commission has proposed a number of additional recovery measures. These will now need to be negotiated on by EU Member States. In parallel the European Commission has proposed or will propose a number of legislative amendments in the field of financial services to provide temporary burden relief and support the transmission mechanism between fiscal and monetary support measures and the real economy.



  • An amendment to the EU Capital Requirement Regulation (CRR) for banks allowing banks when calculating their prudential requirements to use pre-2020 expected credit loss figures under IFRS. The temporary measures would also allow for a less burdensome prudential provisioning by banks for loans that have become non-performing, if those are backed by public guarantee schemes. Finally, the amendments would also apply a beneficial prudential treatment to sovereign bond holdings of EU Member States on bank balance sheets that are denominated in Euro.
  • Potential amendment to the EU Prospectus Regulation to introduce a modified ‘short form’ prospectus for secondary issuance which would entail an ‘equity only’ short form prospectus via which all companies listed for at least 18 months on a regulated market or an SME growth market could raise equity capital for a temporary period of 18 months after the adoption of the new rules. Legislative amendments could also include changes to facilitate convertible issuance through a temporary increase (for 18 months) of the threshold for the issuance of bonds that would require a second prospectus on conversion of debt into equity.


EU RECOVERY PACKAGE – Proposal from the European Commission on the table and now being negotiated on by Member States

The European Commission has proposed the creation of a temporary budgetary facility as part of the next multi-annual EU budget with a capacity of EUR 750 bn (on top of the proposed 7 year EU budget of EUR 1.1 trillion) to provide extraordinary support to Member States and companies. The recovery measures are also viewed by the European Commission as a primary instrument for delivering and supporting the green and digital transformation of the EU across all segments of the economy – with many funds being conditional on serving that purpose. The recovery package is now subject to negotiations between EU Member States and the final shape and size could vary from what the European Commission has put forward as a proposal. These negotiations are expected to take place over the course of June and possibly July 2020.

To raise the funds for the measures, the European Commission would borrow on financial markets using its triple A rating, with reimbursement between 2027 and 2058 and debt servicing through creating new own resources that the EU can raise.The options for these new resources from 2024 – adding to national contributions, VAT-based own resource, and plastics contribution include:

  1. Revenue from extending Emission Trading Scheme to the maritime and aviation sectors – Estimated revenue of EUR 10 bn per year
  2. Revenue from a Digital tax agreement – Estimated revenue of 1.3 bn per year
  3. Revenue from operations of large companies in the EU possibly through a single market usage fee for companies with a turnover above EUR 750 million – Estimated revenue of EUR 10 bn per year
  4. Revenue from a carbon border adjustment mechanism – Estimated revenue of EUR 14 bn per year

The Recovery package has three define pillars. Overall the EUR 750 bn would be split into EUR 500 bn in grants + €250 bn in loans to be disbursed between 1 Jan 21 and 31 Dec 24.

  • Pillar 1: Support for Member State investment and reforms
    • Recovery and Resilience Facility – €560bn (€310 bn in grants and €250 bn in loans) – for Member State investment and reforms designed by the individual Member States under the European Semester mechanism.
    • REACT-EU – €55bn – top-up instrument on top of cohesion funds based on a new allocation key – for workers, SMEs, health system, green & digital transitions, across all sectors
  • Pillar 2: Incentivising private investment
    • Solvency Support Instrument – €31bn (€300 bn through leveraging) – for regions, sectors, companies most affected and with a focus on maintaining a level-playing field across the EU
    • Strategic Investment Facility under InvestEU – €15 bn guarantee by Next Generation EU (€150 bn through leveraging) – for stronger value chains and key technologies
  • Pillar 3: Lessons from the crisis
    • EU4Health programme – €9.4bn – for prevention, crisis preparedness, vital medicines & equipment, long-term health, and strengthening existing cooperation programmes


Image: Deniz Anttila / Pixabay


Tarek Tranberg

Tarek Tranberg

Tarek is in charge of EACT’s public affairs and policy advocacy efforts. He represents the interests of corporate treasurers on all aspects of European financial regulation with policymakers at EU – and where relevant – national level. Prior to this Tarek worked at FleishmanHillard – a public affairs consultancy - advising clients on securities markets’ infrastructure and in particular pre- and post-trading issues. Before joining FleishmanHillard, he worked at Deutsche Bank’s Alfred Herrhausen Society in Berlin. Tarek holds a dual degree in Political Science and Law from the University of Münster and the London School of Economics and Political Science (LSE). He also holds a Master’s degree in Politics and Government in the EU from the LSE.


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