A political mentor of mine once advised me that in politics “…if you can imagine something, it can happen”. Looking back at 2020, I am inclined to add that “….even if you can’t imagine something, it still might happen”.
It has been a year without precedent.
Little did we know that back in late December 2019 when China informed the WHO of a number of ‘flu-like’ cases, that within a matter of 3 months, Europe itself would become the epicentre of the pandemic. No one foresaw the utter devastation that this disease would cause our citizens. It has affected us in every way, in how we interact, in how we work and in how we think about the future.
The Eurogroup is the group of finance ministers who represent countries that share a currency - the euro. We meet regularly and are in contact with each other constantly. Our role is to coordinate our policies for the benefit of the people of Europe. Each of us knows that by acting collectively we achieve more together than any of us could achieve on our own.
As President of the Eurogroup I have been able to witness first-hand the economic policy response to this crisis at both the national and European level. If 2020 is a year without recent precedent with regard to our health, it was also a remarkable year for economic decisions that responded to this crisis.
We confronted a disease that does not recognise national borders, a pandemic that spreads through contact and connectivity. In 2020 we used our economic interdependence as a source of strength to respond to this threat. It is important, as we end the year, to reflect on what has been done, but also to look ahead to 2021.
First, national governments were quick to respond. Central to this, was using our tax and social protection systems to respond speedily and effectively. The decision to temporarily suspend the fiscal rules was a clear signal that this crisis and indeed our response to it would be different. It enabled Governments to embark on a range of exceptional support measures - both in size and nature - to safeguard employment and incomes. These actions were vital in cushioning the economic impact of containment measures on our economies.
EU institutions have also collectively engaged in a range of unprecedented supports to what is an unprecedented crisis. Our Central Bank, the ECB, has played a central role throughout the year with supportive policy measures. These have made borrowing cheaper for those who need it across the EU. The fusion of their policies and Government action to support economies has been profoundly important in helping communities and businesses respond to this crisis.
In April, the Eurogroup, together with non-euro area Members, reached an agreement on three crucial safety nets to the value of €540 billion, all of which are now fully operational. The SURE programme is providing funds to help countries pay for their wage subsidy schemes in order to help keep people at work. The European Investment Bank has more power to lend to companies, especially SMEs, affected by COVID-19. And governments can have access to a new unconditional precautionary credit line from the European Stability Mechanism.
On top of that, EU leaders agreed in July on a €750 billion Recovery Fund to support the regions and sectors most impacted by the pandemic, through a mix of grants and loans. This plan sits at the very heart of the EU recovery strategy.
Finance Ministers have now concluded an agreement on how we will respond to banking difficulties in the future. This is part of how we strengthen the euro by strengthening our ability to respond to crises.
So, in looking back at the year, the European Union has stepped up. We have taken crucial decisions that would have been unthinkable just one-year ago.
Looking to 2021, we will need to be mindful that while vaccines will arrive, the process of vaccination will take time. Budgetary policy will need to remain supportive and agile throughout the course of the year as the health situation evolves.
At the right time we will have to reduce borrowing. We could respond to this crisis because the Euro area is credit worthy. National finances were in good condition. The Eurogroup and all partners in Europe will begin this journey at the right time.
While 2020 has no doubt been an extremely challenging year and one that we will never forget, it has, if anything, re-affirmed what Europe can do when faced with such a challenge. The responses have been exceptional in every way.
I believe that if the European Union had not existed before this crisis we would now be beginning the slow process of creating it. The most effective and powerful actions are shared actions. Unity of purpose, underpinned by solidarity matters. It is never easy. Yes - the negotiations, the discussions are intense and difficult. But this is only because these decisions matter so much.
However I know that there are so many millions of Europeans now without a job, worried about their futures and their health. There is no time and there is no cause for self-congratulation.
But there is a need to recognise the scale of response and to emphasise the need for similar co-ordination and determination next year. I believe Europe will again rise to this challenge, and that we can complete this journey together. So, to finish where I started, I can now imagine a much better year in 2021.
Paschal Donohoe is Minister for Finance and president of the Eurogroup