COVID-19: This is How Europe is Planning to Handle the Situation


COVID-19: This is How Europe is Planning to Handle the Situation

No thanks to the Covid-19 crisis, production and sales of motor vehicles have come to a sudden halt in most parts of the world.

Without new revenue, many vehicle manufacturers are expected to face significant liquidity problems in the short to medium term. With available levels of cash varying across the sector, several companies could face shortages within a matter of months.

Realising this, various measures are already being taken by many organisations and governing bodies around the world in an effort to support the companies and most importantly, the workers affected.

Let’s take Europe for instance. According to the European Automobile Manufacturers Association (EAMA), the European Central Bank (ECB), the European Investment Bank (EIB), and the European Commission (EC) are currently working hand-in-hand to make sure that the automotive industry doesn’t take a bad fall.

“It is clear that this is the worst crisis ever to impact the automotive industry,” stated Eric-Mark Huitema, the Director General of the European Automobile Manufacturers Association (EAMA).

“With all manufacturing coming to a standstill and the retail network effectively closed, the jobs of some 14 million Europeans are now at stake. We call for strong and coordinated actions at national and EU level to provide immediate liquidity support for automobile companies, their suppliers and dealers.”

This could also affect things in markets that depend on European manufacturers which include the Asian region, as new models, spare parts, CKD packs, and everything that is coming to us from European brands, could see a delay.

That said, the European Central Bank has announced that it is planning to purchase bonds issued by Member States and commercial companies, and also to “relax” various requirements imposed on commercial banks which offer hire purchase loans to buyers.

The ECB has also adopted a Pandemic Emergency Purchase Programme on 19 March, which enables it to purchase sovereign bonds from all EU Member States under flexible conditions as well as commercial papers of sufficient credit quality.

It is said that the programme has an envelope of €750 billion and runs until the end of the year. On top of that, the ECB will conduct additional longer-term refinancing operations to provide immediate liquidity support to the euro area financial system.

In addition, it will apply considerably more favourable terms (lower interest rates) during the period from June 2020 to June 2021 to all longer-term refinancing operations outstanding during that time.

The European Investment Bank on the other hand, has proposed a plan to mobilise up to €40 billion of financing. This will go towards bridging loans, credit holidays and other measures designed to alleviate liquidity and working capital constraints for SMEs and mid-caps.

Last but not least, the European Commission has proposed to the European Parliament and the Council to direct €37 billion under EU cohesion policy to the fight against the coronavirus crisis.

Amongst the other measures proposed, the Commission also recommends that Member States take action to ensure the free movement of all workers involved in international transport, whatever the transport mode.

In particular, rules such as travel restrictions, and mandatory quarantine of transport workers not displaying symptoms, should be waived.