The European Commission has issued a release on a coordinated response to counter the economic impact of the coronavirus, economic news site Portfolio reports. According to the plan, the EU, by not applying the regular allocation system, will give money directly to the member states in order for them to fight the coronavirus epidemic and restart their economics. The decisions are of such magnitude that they were unprecedented even during the 2008-2009 global financial crisis. However, Viktor Orbán’s reaction seemed rather pessimistic about the money, warning that “we have to act carefully.”
The measures essentially allow the member states to act decisively in a coordinated way by using the full flexibility of state aid, and stability and growth pact frameworks, and in addition, EUR 37 billion will also be directed to the fight against the coronavirus crisis. Most importantly, the member states are not obliged to refund the approximately EUR 8 billion previously allotted for the structural funds.
The initiative comes after the recently announced EUR 25 billion in funds to support SMEs and the labor market.
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According to the information published on the European Commission’s website, the money could be used by member state governments to ensure the necessary supplies for the health system, to support citizens and companies, particularly SMEs, and to take measures, such as wage subsidies, suspension of payments of corporate and value-added taxes or social contributions.
In addition, member states can grant financial support directly to consumers, for example for canceled services or tickets that are not reimbursed by the companies concerned. Also, EU State aid rules enable member states to help companies cope with liquidity shortages and urgent rescue aid.
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This is a huge change: instead of using the EU fund allocation system, the Commission allows the member states to spend the money on areas where they see most fit to deal with the coronavirus crisis. With this decision, Hungary’s budget also gains some room for maneuvering.
Right now, it is not clear how much money Hungary can apportion with these flexible rules, but it is likely to amount to billions of Euros.
As the economic site points out, this is in line with what Prime Minister Viktor Orbán outlined in his quite pessimistic speech at the Hungarian Chamber of Commerce and Industry’s (MKIK) recent conference in regards to the amount of financial support needed to restart the economy.
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Portfolio also underlines that this is not extra money from the EU, but a reallocated sum from previously granted money to fight against the coronavirus. Therefore, it won’t contribute to the financing of other parts of the economy, but it will come in handy in this emergency situation nonetheless.
In the meantime, answering a question, PM Orbán also commented on the news in Parliament on Monday.
“My hope is that it [the EU money] will not be taken from, but given to us, but we do not know anything for sure yet,” the Prime Minister said.
The fact that the money is being transferred from the Cohesion Fund is not reassuring news, Orbán said, adding that “it may be to our advantage, but it is definitely at the expense of the fund.”
“So we will have to act carefully,” Orbán concluded.
Featured photo by Szilárd Koszticsák/MTI