Increase of payment appropriations for the Emergency Support Instrument to finance the COVID-19 vaccines strategy and for the impact of the Corona Response Investment Initiative Plus

The changes to the general statement of revenue and in section III are available on EUR-Lex ( https://eur-lex.europa.eu/budget/www/index-en.htm ).

–Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council of 18 July 2018 on the financial rules applicable to the general budget of the Union (…), and in particular Article 44 thereof,

–the Treaty on the Functioning of the European Union, and in particular Article 314 thereof, in conjunction with the Treaty establishing the European Atomic Energy Community, and in particular Article 106a thereof,

4. Financing

5. Summary table by MFF heading

EXPLANATORY MEMORANDUM

1. Introduction

The purpose of Draft Amending Budget (DAB) No 8 for the year 2020 is to provide EUR 6,2 billion in payment appropriations to incorporate (i) additional needs for payments appropriations for the Emergency Support Instrument (ESI) to finance the COVID-19 vaccines strategy and (ii) the additional payment needs for cohesion following the adoption of the Corona Response Investment Initiative Plus (CRII+).

2.Increase in payment appropriations for the Emergency Support Instrument (ESI)

When the Emergency Support Instrument was activated in April 2020 in the framework of the COVID-19 crisis, a very broad series of potential support actions were envisaged based on an initial needs assessment drawn by the Commission in collaboration with Member States. Emergency support funding was aimed to be deployed were it would be most needed and where it would bring clear EU added value. Given the wide range of possible actions, it was originally foreseen that, of the EUR 2,7 billion in commitments authorised by the budget authority, only around half of the payments, EUR 1,38 billion, would be needed in 2020, with the rest arising in following years.

As the crisis evolved, the Commission has adopted several decisions to use Emergency Support funding to support a series of actions such as: assistance to transport essential goods, medical teams and patients affected by COVID-19 (mobility package); procurement of essential health-related products; support for the increase in testing capacities; making more treatments available for COVID-19 patients; support for the interoperability of digital tracing apps and the distribution of disinfection robots for hospitals.

In the course of the evolution of the pandemic and as higlighted in the Commission Communication on a vaccine strategy, it has become clear that a permanent solution to the crisis will most likely be brought about by the development and deployment of an effective and safe vaccine against the virus. Consequently, the search for an effective vaccine has become a priority and the Commission has concluded an agreement with all Member States to negotiate and conclude Advance Purchase Agreements (APAs) on behalf of all Member States with vaccine manufacturers. In these APAs, ESI provides the necessary up-front financing to de-risk essential investments in order to increase the speed and scale of manufacturing successful vaccines. In return, they provide the right to Member States to buy a specific number of vaccine doses within a given timeframe and at a given price. The Commission has already concluded one APA with a vaccine manufacturer in August 2020 and is currently conducting advanced negotiations with a number of other manufacturers.

The APA incentivises vaccine manufacturers to build up production capacity substantially faster than in the context of usual vaccine development, for which they require upfront cash to de-risk their investments implying early upfront payments from the Commission following very closely in time the commitments (often within days after the signature of the contract).

As a result, the current payment appropriations under the ESI are insufficient to cover the contractual obligations that the Commission envisages to take in the short-term with vaccine manufacturers. In order to allow the European Union to secure access to a portofolio of vaccine candidates to maximise the chance of having an effective and safe vaccine available as soon as possible, it is therefore paramount to make the additional payments available as soon as possible. In view of the above, it is proposed to make available sufficient payment appropriations under the ESI in 2020 to cover (a) all the relevant commitments that the Commission will undertake with vaccine manufacturers on behalf of Member States as well as (b) the other ongoing actions. Payment needs in future years will be reduced accordingly.

Considering the reforcement of EUR 140 million already approved by the budget authority in the course of July 2020, the amount of additional payment appropriations needed in 2020 is EUR 1 090 million bringing the total payments for ESI to EUR 2 610 million. The remaining EUR 90 million will be paid in 2021 for commitments not related to the vaccine strategy.

It is also proposed to transfer EUR 53,75 million in commitments and payments from the administrative support expenditure line to the operational line of the Instrument. The total amount of commitment and payment appropriations on the support line of ESI will thus be decreased to EUR 250 000.

EUR Budget line Name Commitment appropriations Payment appropriations Section III – Commission 18 01 04 05 Support expenditure for emergency support within the Union -53 750 000 -53 750 000 18 07 01 Emergency support within the Union 53 750 000 1 143 750 000 Total 0 1 090 000 000

3. Increase in payment appropriations linked to the CRII+

The Commission has proposed in March and April 2020 two packages of measures: the Coronavirus Response Investment Initiative (CRII) and the Coronavirus Response Investment Initiative Plus (CRII+), which were swiftly adopted by the European Parliament and the Council.

Member States are making full use of the flexibilities and liquidities offered by Cohesion funds to help those most impacted: healthcare workers and hospitals, SMEs, and workers. The implementation of the initiative is ongoing and Member States continue to adopt measures in line with the evolving needs. While standard cohesion support focuses on long-term investments for regional convergence, the CRII and CRII+ packages provided emergency response where it was most needed.

As a result of the Coronavirus Response Investment Initiative (CRII) adopted on 30 March 2020, around EUR 8 billion of investment liquidity were released for programmes under the Cohesion policy. In order to ensure that all non-committed support from the cohesion policy funds can be mobilised in 2020 to address the effects of the COVID-19 outbreak on Member States’ economies and societies, the Commission has further proposed the CRII+, which was adopted by the European Parliament and Council. It provides on a temporary basis the possibility for Member States to request 100% EU co-financing for the programmes supported by the European Regional Development Fund, the European Social Fund and the Cohesion Fund for the accounting year starting on 1 July 2020 and ending on 30 June 2021, and increased transfer possibilities between funds as well as between categories of regions. As of 24 August 2020, 107 programmes, covering almost half of the cohesion policy envelope, have opted for the 100% EU-cofinancing rate.

The Commission performed an in-depth analysis of the forecasts submitted by Member States by the end of July 2020 at the level of each programme and considers that a reinforcement of EUR 5,1 billion in payment appropriations is needed in order to cover all expected payable payment applications to be paid in 2020.