Varadkar hails EU €500bn aid package but says loans will have to be paid back
EU Trade Commissioner Phil Hogan has said it will take at least the next four years for European economies and trade, including Ireland’s, to recover in the wake of the Covid-19 crisis.
Mr Hogan said it will take “a number of years” for trade to recover in the aftermath of the pandemic. He said it will be a “constant battle” for the rest of his mandate, which runs to 2024, to “put the jigsaw back together”.
“This is going to be a slow situation where you have to build up all of the various chains that have been disrupted by restrictive practices and some of those chains unfortunately will be broken,” Mr Hogan said on Wednesday.
Speaking at an online event hosted by the Institute for International and European Affairs (IIEA), Mr Hogan said unemployment will rise across the EU and that every member state will be in recession this year.
He said there will be a nearly 10pc fall in global trade in 2020 and that the value of EU exports will decline by €285 billion and imports by €240 billion. While the EU is predicting growth of 6pc next year this is provided the bloc can reopen much of the economy in the second half of this year, he said.
“It’s going to cost a huge amount of money at the end of the day in order to reboot our economies,” Mr Hogan said, citing a possible €1.5tn EU recovery fund. “It’s not going to be small money but it’s needed in order to ensure that we get people back to work, we get our economies up and running again.”
Mr Hogan also criticised the pace of negotiations on a post-Brexit EU-UK trade deal, saying the UK needs to “get on with the job” and not negotiate through the airwaves.
A "high level meeting" between negotiators in June will be "critical”, he said, and that “difficult decisions” will have to be made at the end of next month, the deadline for the UK to apply for an extension to the trade talks. "We need to see a lot more intensive engagement than we have seen in the last few weeks and months,” he said.
Mr Hogan said the EU needed to ensure it more adequately stockpiled medical supplies for future pandemics in the same way that oil reserves were built-up in the 1970s. He said there were 10 companies in Europe producing face masks at the start of the pandemic but this had now increased to 550.
Mr Hogan, who is serving his second term in the European Commission, said the Covid-19 crisis and the breakdown in global supply chains has underlined the importance of global cooperation “like never before”.
Mr Hogan said that “diversifying and solidifying supply chains is the safer and the most efficient solution allowing us to respond to all sorts of crisis situations, not just repeats of the current pandemic”.
He cautioned against countries adopting protectionist approaches in the aftermath of the crisis and said that self-sufficiency was not an option for the EU because the continent is poor in raw materials.
“If more countries pursue the track of self-sufficiency, it will increase competition for scarce resources, drive up prices and deepen international hostilities. It would be a lose-lose situation for our citizens and our economies,” he said.
He said the EU was advocating for “open strategic autonomy” which he defined as achieving the right balance between Europe being open for business and a bloc that protects people and businesses.
He also said that he was in regular contact with his counterpart in the US to make the case for greater transatlantic cooperation. “I believe this is the right time to make the case for global cooperation in a stronger and more forthright way,” he said.
Meanwhile, Taoiseach Leo Varadkar has hailed the €500bn financial package agreed by the EU to help Member States respond to the coronavirus crisis but warned in it's in the form of loans and guarantees that have to be paid back.
Fianna Fáil leader Micheál Martin said he rejects the idea "that anywhere near enough has been agreed".
The Dáil is today debating the EU response to the emergency which Mr Varadkar said was initially poorly coordinated.
He said the crisis has had "deep, sharp economic and social impacts".
Mr Varadkar said the government had supported the idea of 'coronabonds' - an approach that would have led to the shared managing of debt among countries who borrow to fund health services and their welfare states.
But he said this would have required a new EU Treaty and would have taken a long time to agree.
Mr Varadkar said that in the absence of unanimous support for that approach it was agreed alternative solutions for a recovery fund should be developed.
This includes a temporary relaxation of state aid rules which has allowed governments to assist companies.
He said it must be ensured that member states don't use State Aid to give an unfair advantage to their companies and he added: "this is something we're going to watch very closely".
Mr Varadkar said the Eurogroup of countries agreed a €500bn economic package which is to be operational from the first week in June.
He warned: "It should be noted that these are all loans and guarantees and are not grants and borrowed money must be repaid."
He said that together the EU's response is more than half a trillion Euro - "a historic level deployment of resources to respond to an emergency of unprecedented levels."
He said it's a much greater response from the EU than was seen in the financial crisis of a decade ago which was "too little and too late".
Mr Varadkar said the EU had agreed that climate action and the digital economy should be "critical components" of the recovery
Mr Martin said he welcomed the measures agreed at the EU Summit but added: "We reject the idea that anywhere near enough has been agreed, or that what has been agreed has been delivered."
He said: "Other than the outbreak of a war there has never before been such a dramatic and rapid public health and economic shock.
"Just like every other country in Europe, Ireland does not yet really know the scale of the recovery challenge we face.
"If the member states of the Union continue to block measures to develop new direct funding mechanisms then the union's contribution will continue to be economically marginal," he said.