Covid-19 and Government Recovery Plans

As restrictions on society and businesses ease across much of Europe and the Middle East, a new group of public policy challenges have materialized as Governments balance public health concerns with restarting economies as quickly as possible. Finding this balance is crucial, and results in unprecedented and far-reaching, financial, welfare and regulatory initiatives emerging daily across countries and regions.

Our Public Policy Teams in London, Brussels, Berlin, Dublin, Riyadh, Johannesburg and Dubai are helping clients navigate Government recovery plans and below is a snapshot of these plans.  Should you wish to explore further or need advice on how to navigate these systems, please do get in touch.

Exit Strategy for Business

On Tuesday, Prime Minister Boris Johnson delivered a major speech, setting out his Government’s economic recovery plan.

• Building on the Conservative Party’s 2019 Election Manifesto, Johnson renewed his commitment to the ‘levelling up’ agenda and used the opportunity to outline his plans to fix longstanding economic problems across the UK, whilst also promising £5bn to build homes and infrastructure.
• The Government is expected to, later this week, publish its first quarantine exemption list for British holidaymakers, prompting the Foreign Office to amend its travel advisory. It is understood that travellers to as many as 75 countries will no longer have to quarantine for 14 days upon their return to the UK.

Stimulus and Economic Measures

In his speech on Tuesday, the Prime Minister stated that the Government had no intention to use austerity measures in order to reduce the UK’s growing debt.

• Chancellor Rishi Sunak will be under pressure to outline the Government’s plans on tax when he delivers an economic update on 8 July.
• The chancellor is expanding a £500m fund for UK startups hit by the coronavirus crisis, to ensure firms that shifted their headquarters abroad can still access the scheme.
• Earlier this week the Government’s flexible furlough scheme started giving businesses the flexibility to bring furloughed employees back to work part time with the Government continuing to pay 80% of salaries for the hours not worked.
• The Government has announced an additional £100 million in additional support to help zoos and aquariums in England continue to care for their animals during the coronavirus pandemic, expanding on the £14 million relief fund announced in May.

EU

Exit Strategy for Business

• The European Commission adopted a third amendment to its temporary state aid rules in order to extend support to micro, small and medium enterprises (SMEs) and start-ups.
• Under the revised framework, Member States will be able to provide support for all SMEs, even if they were already in financial difficulties before the crisis.
• Companies which have entered bankruptcy proceedings, have not reimbursed rescue aid or are the subject of a restructuring plan are not covered by the proposal.

Stimulus and Economic Measures

• EU Member States agreed on a strategy to gradually lift restrictions on non-essential travel for residents of non-EU countries starting with a preliminary list of 14 countries.
• The list will be updated every two weeks and is based on a number of criteria and conditions set out in the recommendation adopted by the EU Council. Those include both epidemiological as well as economic and social considerations.
• For countries where travel restrictions continue to apply, an exemptions will be granted to some categories of people including EU citizens, long-term EU residents and their family members as well as travelers with an essential function or need.
• The Council recommendation is not legally binding. Member States remain responsible for implementing the content of the recommendation and may, in full transparency, lift only progressively travel restrictions towards countries listed.
• Restrictions for countries not included in the jointly agreed list should not be lifted unilaterally by Member States.

Germany

Exit Strategy for Business

• Corona app now internationally available: Due to the re-opening of the border the Corona App will gradually be available in other countries. This is already the case in most of Germany’s neighbouring countries. By the end of June, the German government’s Corona Warning App had already been downloaded over 14 million times.
• Covid-19 vaccine in clinical testing: The German company Biontech and the US group Pfitzer are the first companies to receive approval to start clinical testing on a vaccine.
• Medical certificate obligation for hotels: The federal and state governments agreed on 26 June that people from an area with a high incidence of Covid-19 infections – such as Gütersloh at present – will only be accepted in a hotel if a medical certificate confirms that they do not have the virus.
• Entry bans lifted for selected Non-EU countries: As of 2 July, citizens from selected 3^rd countries can re-enter Germany. The following countries are included: Algeria, Australia, Canada, Georgia, Japan, Montenegro, Morocco, New Zealand, Rwanda, Serbia, South Korea, Thailand, Tunisia and Uruguay.
• Federal States lift contact restrictions: Many federal states have relaxed to varying degrees the contact restrictions related with the Covid-19 pandemic. In Berlin, for example, any number of people are allowed to meet, as long as they comply with hygiene regulations. In Bavaria, on the other hand, there is still a limit of 10 people. Major events remain prohibited nationwide until end of October.

Stimulus and Economic Measures

• The Bundestag has approved the second supplementary budget: In order to finance the stimulus package to overcome the Covid-19 crisis the Bundestag has approved a total accumulative debt of €217.8 billion for 2020.
• Insolvency time reduced to three years: The federal government has decided that companies and consumers are able to escape insolvency after a maximum of three years if the minimum rate for creditors and the procedural costs are settled.
• Germany participates with €383 million in global initiative: Chancellor Angela Merkel has granted an additional €383 million for the global initiative “Global Goal – Unite for Our Future” to tackle the Covid-19 pandemic worldwide.
• State development bank received around 70,000 loan applications: By the end of June, the state development bank KfW had received around 70,000 loan applications with a total volume of around €50 billion. 99 percent of the applications received have already been decided.
• VAT rates in Germany are temporarily reduced: As part of the economic stimulus and future package that the governing coalition have drawn up and presented at the beginning of June, the VAT rates will be temporarily reduced: from 19 to 16 percent and seven to five percent, respectively. The reduced rates will apply from 1 July to 31 December 2020.
• Rise in unemployment has slowed down: In June, 2,853,000 people were unemployed, 40,000 more than in the previous month but the rise in unemployment was weaker compared to the previous month.
• Start-ups apply for aid equal to €870 million euros: As of 1 July, 67 applications had been submitted for the Start-up fund that totals €2billion.

Ireland

Exit Strategy for business

• This week saw Ireland move to the next phase of exiting Covid-19 restrictions, allowing some sporting activities; places of worship, gyms, cinemas, leisure facilities and hairdressers; creches and childcare facilities; cafés and restaurants; and hotels and holiday parks to resume business.
• The Irish Government has come under renewed pressure to clarify its position on international travel and self-isolation for persons traveling into the country. The Government plans to publish a “green” list of countries by 9 July, indicating where people can travel without a 14-day quarantine.
• However, newly appointed Health Minister Stephen Donnelly has stated that public health officials are “very concerned” that increased international travel will lead to a second wave of coronavirus in Ireland.
• The Health Protection Surveillance Centre (HPSC) has published its interim report on its plan to reopen schools at the end of the summer term break.

Stimulus and Economic Measures

• A new coalition Government is now in place with Programme for Government that includes an agreement to publish a new multi-billion euro National Economic Plan outlining how Ireland will plot its economic recovery. The stimulus package is expected to be unveiled later this month.
• Former Taoiseach and newly appointed Minister for Jobs Leo Varadkar has announced that 183 retail will receive funding via the Covid-19 Online Retail Scheme totalling €6.5 million.
• Fáilte Ireland, Ireland’s tourism office, has said the impact of Covid-19 on tourism had been catastrophic and dwarfed all previous crises.

KSA

Exit Strategy for business

• Saudi Arabia is seeing an upward trend in COVID-19 cases, reporting 190,000 cases to date
• Saudi authorities have mounted large-scale inspections across the Kingdom on fitness centres and barber shops to ensure their compliance with precautions to stem the spread of the virus
• Saudi Arabia begun setting up contingency plans and awareness campaigns to be carried out to guarantee continuation of education during COVID-19
• Saudi Arabia is devising plans for future international transport and is set to forge ahead with those plans once the pandemic is over

Stimulus and Economic Measures

• The Saudi Arabian Monetary Authority (SAMA) is set to inject USD 13.3 billion into the banking system to enhance liquidity in the sector
• A tourism fund is being set up in the Kingdom to contribute to providing government financing to investors, and help complete development projects – it is expected that the tourism sector will be important for Saudi Arabia’s post-COVID economic recovery

South Africa

Exit Strategy for business

• Advanced level 3 lockdown regulations announced Monday 29 June
  • Open, but with restrictions e.g. no serving of alcohol
    • Sit-down restaurants
    • Casinos
    • Business conferences and meetings
  • Cinemas and theatres to open mid-July, regulations to be announced end of week
  • Still no international travel
• Leaders of representative groups in the Taxi industry have elected to violate the law and continue full operations, including resuming interprovincial travel without permits from today. Santaco threatened a nationwide strike if any taxis are impounded by law enforcement officials.
• The Department of Public Enterprises (DPE) withdrew its participation from the Leadership Consultative Forum (LCF), a mechanism formed to facilitate employee engagement towards the development of an operating model for a restructured SAA. The DPE said the forum was not serving its intended purpose and that the unions had contradicted the letter and spirit of the leadership compact they signed with the department.

Stimulus and Economic Measures

• The SA Reserve Bank has announced a program for purchasing government securities in the secondary market in an attempt to increase liquidity.
• According to Statistics South Africa, the country’s economy contracted 2% in the first quarter of 2020. This extends the technical recession that the country found itself in in the last quarter of 2019, but does not include COVID-19 impacts which will be part of the next quarter’s reporting.
• The Finance Minister Tito Mboweni presented the Supplementary Budget for the 2020/21. These were the main points:
  • South Africa will see a budget deficit of R761.7 billion, or 15.7 percent of GDP in 2020/21
  • South Africa’s economy will contract by 7.2% in 2020
  • The government’s debt levels will rise to 81.8% of GDP by the end of this fiscal year
  • The government intends to borrow $7bn (R121bn) from international finance institutions
  • Healthcare will receive an additional R21.5 billion spending for Covid-19 response, an additional R25.5 billion for social grants and a further R19.6 billion for job creation
  • The Treasury expects the revenue shortfall to be more than R300bn.

UAE

Exit strategy for business

• All UAE government employees will return to offices at a capacity of 100 per cent starting from Sunday, 5 July, the Federal Authority for Government Human Resources (FAHR) announced on Monday
• UAE residents with valid residency visa permits who are currently out of the country must undergo a Covid-19 test and receive a negative result at least 72 hours before returning to the Emirates under new rules announced by the UAE government
• Etihad Airways, the national airline of the UAE, in cooperation with the UAE Ministry of Foreign Affairs and International Cooperation, has transported humanitarian aid from the UAE government to 54 destinations
• Emirates Airlines needs to redefine its strategy after the coronavirus pandemic brought global aviation to a near halt, its chief operating officer said, flagging an increased focus on bringing more visitors to Dubai

Stimulus and Economic Measures

• The Khalifa Fund for Enterprise Development, the independent non-profit development entity mandated by the Abu Dhabi Government to support SMEs, has revealed its achievements for year-end 2019. New activated loans were valued at AED 50.3 million, totaling AED 1.32 billion in activated loans since the inception of the Fund.
• Dr Thani bin Ahmed Al Zeyoudi, UAE Minister of Climate Change and Environment, said that the escalating impact of climate change and the dedication of the GCC region to sustainable development make it imperative for everyone to join forces and fast-track the shift to a green economy across all sectors.