As the European Union (EU) continues to build a roadmap to recovery, several measures and initiatives have already been taken at various levels to meet the challenges presented by the pandemic. However, a year after the EU member states imposed national lockdowns to contain the spread of the virus, the situation today remains almost similar with new restrictions put in place in efforts to slow the third wave of infections. This paper gives a brief update on the COVID-19 situation in the EU and discusses the vaccination strategy put in place by the Union. It also analyses the economic recovery plans put in place by the EU to mitigate the impact of the pandemic.
COVID-19 – An Update
The European countries began the New Year by stepping up restrictions on movement and implementing partial lockdowns over concerns related to a more contagious variant of the coronavirus. While France imposed border restrictions, renewed measures for a new lockdown, and ramped up testing, the Netherlands imposed its first night-time curfew of the pandemic, the nation’s first since World War II. Greece re-imposed strict lockdown measures in January 2021 with non-essential shops, schools etc. closed once again along with night curfews. In Italy - one of the worst hit nation in the EU - travel between the regions remains prohibited and the country remains divided into various zones based on local infection rates. In Belgium and Portugal, the lockdown measures have been extended till 1 April 2021 and mid-March 2021, respectively. The highest levels of restrictions were put in place in Ireland, which went into full lockdown in December 2020. The restrictions are expected to remain in place till 5 April 2021. The UK government presented a four-stage roadmap with the complete lifting of restrictions on 21 June 2021. The four stages are incremental with increased activities per stage and would be based on certain conditions such as the rollout of vaccines and the number of cases registered. With the increasing number of cases, the Hungarian government on 4 March 2021 announced a complete lockdown followed by a survey of the situation to be done on 17 March 2021. Similar efforts were also taken in the Czech Republic, where the government limited the free movement of people and increased the testing.
With continued restrictions and lockdown, a few of the EU member states saw a spate of violence and protests against the governments’ measures. Citizen demonstrations and protests, defying the curfew and rules, were reported from the Netherlands, Denmark, Spain and France between January and February 2021. The World Health Organisation (WHO) on 4 March 2021 issued fresh warnings for Europe as the number of confirmed cases increased. WHO Europe’s director, Dr Hans Kluge said that the increased number of cases “represented a 9% rise on the previous week and bringing a promising six-week decline in new cases to an end.” The resurgence of cases was reported largely from the Central and Eastern European countries, with the infection rate in Western Europe already high. A total of 25,220,376 cases have been reported in the EU/EEA with over 592, 929 deaths[ii] (as on 25 March 2021).
The EU vaccination strategy was put in place in June 2020 when it was decided that the Commission will negotiate the purchase of the vaccination on behalf of its member states. The strategy rested on two pillars – first, securing the purchase of vaccines and sufficient supplies for its member states through advance purchase agreements; second, adapting EU’s regulatory framework to accelerate development, authorisation and availability of the vaccines while maintaining safety, quality and efficacy. The release of strategy was followed by the signing of Advanced Purchase Agreements (APA) with the following manufacturers – AstraZeneca (300 million doses with further request of 100 million) in August 2020, Sanofi-GSK (300 million doses) in September 2020, Janssen Pharmaceutica NV (200 million doses with further request of 200 million) in October 2020, BioNTech-Pfizer (200 million doses with further request of 100 million) in November 2020, CureVac (225 million doses with further request of 180 million) in November 2020 and Moderna (80 million doses with further request of 80 million) in November 2020.
The EU further supplemented its vaccination doses by signing a second agreement with Moderna in February 2021 for an additional 300 million doses that included the purchase of 150 million doses in 2021 and the optional purchase of 150 million in 2022. Similarly, an additional agreement was signed with BioNTech-Pfizer, in February 2021, for supply of additional 200 million doses with an option to request supply of additional 100 million doses. While EU’s vaccine portfolio amounted up to 2.6 billion doses, only three vaccines have been approved by the European Medicines Agency (EMA) for administration – BioNTech-Pfizer which was approved in December 2020, AstraZeneca and Moderna, both of which were approved in January 2021.
The EU trails in vaccinating its population primarily due to two issues – first is the slow process of authorisation of the vaccination. The EMA requires input from every member state on the approval of the vaccination after which the regulatory body issues a conditional marketing authorisation which is closer to the standard process for vaccine approval. As inputs are required from every member state, it takes time to grant approvals. Also, EU insisted that liability in case of side-effects on health remains with pharma companies which have further slowed down the authorisation.
Second, the key issue was the supply of vaccination. In January 2021, AstraZeneca announced that it was cutting its supply to the Union by 60% from levels it had agreed to, due to production glitches. Apart from AstraZeneca, the delivery of BioNTech-Pfizer doses has been slow due to changes in production process by the manufacturer in order to increase the production. This led to increased criticism of the Union by the member states over the slow rollout of the vaccination. Highlighting the tensions over vaccine supplies, the EU Commission President Ursula Van Der Leyen said that “Europe invested billions to help develop the world's first COVID-19 vaccines...and now, the companies must deliver. They must honour their obligations.”[vii] This raised the possibility of strict export control on the doses manufactured in the Union and transparency in production.
The slow rollout of vaccine has also led countries like Hungary and Slovakia to order doses from Russia, while Austria and Czech Republic have also expressed interest in procurement of Sputnik V. Italy on 9 March 2021 became the first EU member state to approve the production of Russian vaccine Sputnik V. The production line would be put in place once the EMA grants its approval. Similarly, countries like Austria and Denmark have collaborated with Israel for the production of second-generation vaccines against the new variants of coronavirus. The governments of both countries justified their collaboration (called ‘First Movers Group’) as a means to reduce relying solely on the EU for the COVID-vaccines.
To monitor funds disbursed and manufacturing of the doses under the APAs in the context of shortages of COVID-19 vaccines, the European Commission in January 2021 released its guidelines for transparency and authorisation system which required the pharma companies to notify the member states about their intention to export vaccines produced in the EU. This mechanism is in place until the end of March 2021 and applies only to those companies with whom the EU has concluded APAs. The mechanism was used for the first time by Italy on 4 March 2021 when it blocked export of 250,000 AstraZeneca doses to Australia. These doses were manufactured in Italian region of Anagni. Considering the short supply of vaccine in the EU and Italy, the Italian government, supported by the European Commission, rejected the request for export by AstraZeneca. Acknowledging greater urgency of vaccination in Italy, Australian Prime Minister Scott Morrison requested the Commission to review the decision on export controls. France supported the decision saying that “it could follow suit in blocking exports of coronavirus vaccines outside the EU if necessary, to enforce its own contracts with drugs manufacturers.” The export to Australia was blocked because the country is not on the EU’s list of vulnerable nations as the regulation exempts distribution to nations across the Middle East and North Africa and 92 low and lower middle-income states, from being blocked by member states. Countries like UK, Japan, Canada, Australia, New Zealand, etc. are not exempted.
Path to Economic Recovery – Uneven in the Uncertain Times
The COVID-19 pandemic led to an unprecedented economic impact on the EU economies. As soon as Europe became the epicentre of the virus in March 2020, the EU had suspended fiscal rules requiring countries to reduce their deficits to below 3% of gross domestic product (GDP) and reduce public debt each year until they reach the target of 60% of GDP. These measures are expected to remain suspended through 2021. The EU also launched several stimulus programmes to mitigate the Eurozone economy - such as immediate relief for the medium and small scale industries, directing €37 billion under the cohesion policy to the COVID-19 outbreak, under the Solidarity Fund, up to €800 million were made accessible for 2020. To support the dismissed workers and self-employed, the European Globalisation Adjustment Fund of up to €179 million was also initiated.
On 9 April 2020, EU finance ministers had approved one of the biggest stimulus plans of €540 billion to support the coronavirus-stricken economies. It included measures to back the workers, businesses and states in their fight to keep their economies afloat. Also, the EU ministers approved €200 billion in loans from the European Investment Bank (EIB) for EU businesses and a €100 billion jobs support program that was proposed by the European Commission on 2 April 2020. This was followed by the unveiling of the ‘Next Generation Recovery Plan’ of €750 billion in May 2020 with an aim to address the damage caused by the pandemic and increase investment in ‘green, digital, social and more resilient EU’. Under this recovery plan, the new Recovery and Resilience Facility (RRF) of €672.5 billion was proposed to be available in loans and grants to support reforms and investments by member states. The recovery package was approved by the EU member states in July 2020 and was hailed as a ‘Hamiltonian Moment’ for the EU countries. This was so because of two reasons – first, it was the first time that the EU countries would raise the monetary sum by selling bonds collectively instead of individually; and second, the package would be provided to the member states that are hardest hit as grants and not as loans. The leaders also signed the bloc’s next seven-year budget for €1.074 trillion. The regulation on the objectives, financing and rules for accessing the RRF was adopted in February 2021 to finance national measures to alleviate the socio-economic consequences of the pandemic. The funding will be available for three years.
Despite the infusion of substantial stimulus by the EU, the economic situation remains bleak. The latest economic forecast by the European Commission released in February 2021 projected that the economy was expected to grow by 3.7% in 2021 and 3.9% in 2022 after contracting by 6.8% in 2020. However, the economic recovery would remain uneven among the member state. The forecast highlighted that member states like Poland, Lithuania, and Latvia etc. would be able to bounce back completely with Finland and Sweden following closely. For members like France, Germany, Belgium etc., the growth will not be enough to cover the losses and would have to wait till 2022 to fully recover their growth rate. However, for countries worst hit by the pandemic, such as Italy, Spain and Greece, they would have to look beyond 2022 to recover completely from the pandemic's fallout. Ireland emerged to be a bright spot in the forecast as the only member state with 3% GDP growth “boosted by exports from multinational companies specialising in medical equipment, pharmaceuticals and computer services.”
Challenges for the EU
With the EU undergoing the third wave of infections, the Union is registering over 125,000 new coronavirus cases daily[xix]. The major challenges for the EU emerge from the increasing number of cases, renewed lockdown measures and its slow vaccination drive which is also impacting its economic recovery. This is further aggravated by the announcement of suspension of AstraZeneca vaccine by several member states. While the EMA has said that the benefits of the vaccine outweigh the risks, the suspension of vaccination is expected to further slow down the vaccine distribution. So far only 7.7% percent of the EU’s population has received a first vaccine dose as compared to 36% in UK and 21% in the US.[xx] Already, the response to the vaccine rollout by the member states has not been positive. In a survey done by Euronews between 25 February-1 March 2021 on vaccine rollout strategy in four countries – UK, France, Germany and Italy – 75% French, 77% Germans and 68% Italians were unhappy with their respective country’s vaccine programme, while 85% in the UK expressed satisfaction.
Moreover, the strict export controls put in place after the standoff with AstraZeneca have led to varied responses from countries like Canada, which urged the EU on “the importance of critical health and medical supply chains remaining ‘open and resilient’”. Similarly, Taro Kono, the minister in charge of Japan’s pandemic response, expressed his concern that the EU might seek to block vaccine exports until it had satisfied demand within the bloc. The WHO also criticised the EU's announcement saying such measures risked prolonging the pandemic and that “vaccine nationalism could lead to a protracted recovery”. While the EU has been criticised as being protectionist for its vaccine control mechanism, it has justified its guidelines on the basis of ensuring that the manufacturers fulfil their contractual obligations.
The slow vaccination and export control are compounded by the fact that this public health crisis has put enormous stress on the European economy. The economists have predicted a recession that would be the worst since the Second World War with the Eurozone contraction of 6.8% in 2020. The EU has put in place various initiatives such as a bond-buying programme by the ECB, recovery plans of trillions of euros, along with small stimulus plans to boost economic recovery. However, the latest economic forecast by the European Commission, released in February 2021, projects slow growth and a difficult path of recovery due to the uneven economic trajectory of the member states.
In a year since the WHO declared the COVID-19 as a pandemic, the EU has come under severe stress economically, socially and politically. Amidst increasing frustrations over the vaccination drive, shortage of doses and accusation of protectionism, the EU on 11 March 2021 approved the authorisation of Johnson and Johnson vaccine, making it the fourth vaccine to be used in the Union. However, with the number of infections rising, the slow vaccination inoculation programme, logistical obstacles, limited economic recovery, new restrictions and lockdown measures are expected to increase resentment toward respective governments and Brussels. If the situation persists, the economic recovery of the EU would also be stymied as the governments would have to continue with the restrictive and lockdown measures, making the path to recovery more challenging.
* Dr. Ankita Dutta, Research Fellow, Indian Council of World Affairs
Disclaimer: Views expressed are personal.
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