Episode 1: The Coronavirus Response Investment Initiative
Main topics: new flexibilities for ESIF financial instruments to help businesses respond to challenges of the COVID-19 outbreak.
A discussion with Axel Badrichani, Deputy Head of Unit DG REGIO, European Commission, hosted by Desmond Gardner from the fi-compass team at EIB.
We’re here today to discuss the Coronavirus Response Investment Initiative or CRII. Under these measures, the Common Provisions Regulation has been amended what was the rationale behind these changes?
The rationale behind CRII and also the complementary package, called CRII Plus, is to allow using the unspent Cohesion Policy funds to provide immediate liquidity to Member States in order to respond to the health crisis and its social and economic impact. The flexibility that we have introduced for financial instruments is to contribute to this goal of providing immediate liquidity.
Indeed, we know that financial instruments are close to businesses and entrepreneurs so that should make them well placed to help support the economic response. What is your view of the needs of European businesses at the moment?
SMEs which are the most affected by the crisis do need to have continued supply of affordable finance, in particular to cover their needs of working capital. We are doing quite a lot already, with close to six hundred financial instruments in Europe, with approximately fifteen billion Euros allocated to SME support but more can be done.
So what do you think will be the immediate benefits of the CRII and CRIII Plus package? What feedback have you received from Member States so far?
We have received very positive feedback, I must admit, on the flexibilities that we have introduced in particular on the ex-ante assessment and the fact that now it will not be necessary anymore to update them in case we modify an existing instrument. Also, for new instruments, we have another simplification: we do not request to have such a detailed ex-ante assessment, it can be a light one, building on the information that is available at the level of managing authorities.
One of the other flexibilities that we have introduced and is particularly appreciated is the fact that we are not going to request supporting documents for working capital, so there is no need to justify the use for intended purpose. This is a very big control simplification. When we look at these two flexibilities, the ex-ante and the fact that you don’t need to provide supporting documents such as business plan, we believe that financial instruments can be set up faster and in an easier way.
And what are the other important measures in the package?
Another amendment which is particularly relevant is the fact that we are giving the possibility to transfer resources between funds, between categories of regions, and also the fact that we are relaxing the co-financing requirements. These three elements should ensure that sufficient resources could be allocated to the regions the most in need.
The Temporary Framework for State aid is also going to be important.
Indeed we have noticed that we had to be more flexible as regards State aid and now with the Temporary Framework we can provide support of up to EUR 800 000 per entity, which could be combined with the support provided under de minimis. In total, up to EUR 1 000 000 could be provided to an SME.
fi-compass is also playing its part: we have produced a fact-sheet on the use of financial instruments and we have a webinar coming up next week on this topic. What should participants expect from the event?
We are looking forward to the webinar. This is a new type of event for us and we want to use new approaches to respond to the current lockdown. We want to be able to explain in more detail the flexibilities that have been introduced under CRII and CRII Plus and we want to be able to answer practitioners’ questions.
What will be the format of the event? We know from FI Campus and other events that participants really benefit from hearing from experts from the European Commission as well as peer-to-peer exchange. We have an interesting case study from Slovakia.
Yes, indeed, we are going to have some Commission experts explaining the new flexibilities. We are planning to have a panel also between the experts and some of the Member States who implemented financial instruments and we will also be joined by the CEO of Slovakia Investment Holding. They have implemented a guarantee instrument in the last few weeks which we find very interesting and we want to share this experience with the audience.
It is indeed a very interesting case study. They managed to implement very quickly the instrument: they went from the call to signing the first guarantee agreement within a month, so it will be good to hear from them. Now for the last question, we’d like to know more about you and your colleagues in the Commission. How are you impacted by this crisis?
It has definitely changed our daily life. The whole institution had to adapt quickly and we all had to be more reactive to embrace new technologies, so now we are quite familiar with using video conferences and using different IT tools.
Indeed, new skill for all of us! Do you like working from home?
It is quite challenging, I have to say, especially when you have kids at home. But it has also its advantages. Having said that, I’m looking forward to going back to the office and meeting all colleagues.