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EU Vows to Help Companies Access Dearly Needed Emergency Funds

2 Mins read
imageForex10 hours ago (May 28, 2020 11:18PM ET)

(C) Reuters. EU Vows to Help Companies Access Dearly Needed Emergency Funds

(Bloomberg) — The European Union promised to solve problems in getting unprecedented government relief measures to companies so they can survive the coronavirus pandemic.

While a number of good initiatives have been put in place across the 27-nation bloc, “the implementation is not even across member states,” European Commission Vice President Valdis Dombrovskis said in an interview.

Companies and households seeking liquidity from banks shouldn’t face “adverse conditions like substantially raising interest rates, burdensome application procedures, excessive fees charged and excessive collateral requirements,” he said.

Lenders are playing a very different role in the current crisis than they did in the last one more than a decade ago. They were the root of the problem and swallowed vast amounts of taxpayer funds. Now they’re on the frontlines in channeling public aid to companies that desperately need cash.

Governments have deployed trillions of euros in stimulus to keep businesses afloat and workers employed during the shutdowns. Much of the money is meant to make sure firms don’t run out of money despite a sharp drop in revenues, through government guarantees on new bank loans.

Small businesses have identified a range of problems however, according to a survey published by lobby group SME United this week. On top of the issues also identified by Dombrovskis, banks are at times hesitant to take risks where government guarantees don’t cover the full amount that borrowers are seeking, it said.

“We’ll be looking whether we can set some kind of European benchmark of relief measures, best practices in selected areas which then can be followed by institutions across the EU,” said Dombrovskis, who spoke hours after the commission held a meeting with industry groups on the matter.

“We’re talking about weeks, not months, because one thing which business and consumer organizations were especially emphasizing is urgency,” he said.

‘All Tools’

Germany has been able to deploy much greater stimulus than countries with less fiscal power, another problem that the EU is grappling with. The bloc’s executive arm has previously warned that economic divergence as a result of the outbreak could threaten the stability of the euro area.

Dombrovskis said stimulus would have to flow through various channels, including European ones, to even out those differences.

“We need to use all tools which are at our disposal,” he said. If productive capacity can be maintained, “we’ll be able to rebound quicker and stronger once the pandemic is under control.”

(C)2020 Bloomberg L.P.

EU Vows to Help Companies Access Dearly Needed Emergency Funds

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