RIGA - There are concerns that in the aftermath of the Covid-19 crisis, inequalities between European Union (EU) Member States may increase, as countries with greater budgetary capacity will be able to better support their businesses in the single market, European Parliament Member Inese Vaidere (New Unity) believes.
Assessing the fight against Covid-19, the politician expressed the opinion that many concrete decisions have been made at the European level that will help Latvia overcome the crisis. As a success, she highlighted the EP's response to the need to amend the EU budget so that member states could have urgent financial support to mitigate the effects of the virus.
These decisions allow member states to utilize EUR 40 billion for immediate economic and healthcare needs. Vaidere emphasized that this is very important for Latvia, because as a result, it is possible to spend around EUR 800 million flexibly and without co-financing, which is usually at least 15 percent. These funds make it possible to support the people and industries most affected by the virus - to buy medical supplies and equipment for hospitals, to help entrepreneurs and workers.
"The next step was a larger plan of EUR 540 billion to help cover the costs of the crisis. Latvia will be able to benefit from it in three ways. First, each eurozone country will have a credit line of 2 percent of the country's GDP from the European Stability Mechanism," Vaidere said.
According to her, if necessary, this instrument can provide Latvia with a loan of EUR 600 million to cover health expenses. But she stressed that such borrowing should be carefully considered. "Now we hear how some Latvian political forces are calling to ''push the pedal to the max'' and spend and construct as much as possible, but we must remember that this is growing a debt that will have to be repaid to future generations," Vaidere emphasized.
The politician gave a positive assessment of the European Investment Bank's guarantee fund of EUR 200 billion, which will allow member states to provide special support to small and medium-sized enterprises. The politician emphasized that these companies are the backbone of the Latvian economy, which will help Latvia emerge from the crisis, therefore she calls for the active use of the fund.
Meanwhile, the Sure program to reduce unemployment will provide loans in the amount of EUR 100 billion. In Latvia, it will help finance so-called downtime benefits. These loans will be provided by guarantees provided by EU member states, and Latvia will have to guarantee EUR 57 million, Vaidere explained.
"This raises some concerns that if, for example, Italy is unable to repay their loans, we will have to help cover them. However, promoting employment is a priority. All three support mechanisms will start in June," said the politician.
From the politician's point of view, it is important for Latvia that countries with greater budget opportunities do not gain unfair advantages by supporting their companies, which would distort competition in the EU single market and from which Latvian entrepreneurs would suffer. This poses serious risks that inequalities between member states' levels of prosperity may increase after the crisis, the politician explained.
The AFP news agency reports that France and Germany proposed Monday a 500-billion-euro ($542-billion) fund to finance the recovery of the European Union's economy from the devastation wrought by the coronavirus crisis.
Financed by "borrowing from the market in the name of the EU," the 500 billion euros will flow to the "worst-hit sectors and regions" in the 27-member bloc, the two countries said in a joint statement.
The 500 billion euros ($545 billion) will come in addition to the EU's normal spending plans for 2021 through 2027, which are currently under negotiation.