THE EUROPE OF FINANCE IN THE COVID-19 CRISIS

Faced with an unprecedented crisis, Member States have simultaneously put in place a quick budgetary support coordinated by the European Commission. The European Commission has authorized about 3 000 €bn of State Aids, 80% of which concern Germany, France and Italy. This public support has been variable both in quantitative and qualitative terms taking variable forms, depending on the budgetary space available in Member States. These disparities fully justify the integrated European recovery plan of 750 €bn proposed by the European Commission. Alongside budgetary measures, the reaction of central banks protected until now the financial system. However, since the beginning of this crisis, the level of indebtedness of firms has increased, going along with a noticeable reduction of average maturities. A historical high volume of private bonds has seen its rating downgraded. More generally, the rating of European firms is going down. In this context, any new shock on the economy could lead to fast and brutal corrections. The challenge for the European decision makers is now to create the conditions of an investment led recovery, financed through capital injection rather than debt and aligned with the long-term objectives of the EU. This is today’s priority for the EU. To meet this objective, Europe will have to be able to mobilise in synergy national and European public capitals and private investments. The relaunch of the Capitals Markets Union project is key on this point of view.