If approved by the leaders of the 27 nations, the move would be the first time the EU activated an escape clause that allows for “a coordinated and orderly temporary deviation" from normal requirements “in a situation of generalized crisis caused by a severe economic downturn," the European Commission said.
“Last week, I said we would do whatever is necessary to support the Europeans and the European economy. Today, I’m happy to say we delivered," commission President Ursula von der Leyen said in a video posted on Twitter. Triggering the escape clause “means national governments can pump into the economy as much as they need."
European countries already are putting funds into boosting health care capacity, keeping businesses afloat and helping citizens taking financial hits amid nationwide lockdowns and government-ordered closures, the EU said. Together with a dramatic falloff in economic activity, the spending “will contribute to substantially higher budgetary deficits," the commission said..
The EU adopted the escape clause in 2011 in the wake of the global financial crisis. The European Commission said that since it forecast a week ago that the virus would lead to a 1% reduction in GDP this year, ”more adverse scenarios, linked to a deeper impact of the pandemic" had become likely.
“Indeed, assuming an extension of the health crisis up to the beginning of June or beyond, the fall in economic activity in 2020 could be comparable to the contraction of 2009," the worst year of the global financial crisis, the European Commission said in a document outlining its rationale for the recommendation.
EU leaders are set to have a summit by video-conference on Thursday.