ASG Analysis: The End of the Beginning for COVID-19 in Europe?

ASG is closely tracking and regularly reporting on the COVID-19 pandemic; our most recent global update is available here.


European heads of states will meet tomorrow to sign off on an ambitious €540 billion aid package to help European economies, governments, and consumers manage the fallout of the COVID-19 crisis. The package is part of the European Union’s attempt to put in place the steps to show how Europe, and the developed world, can emerge from the pandemic. The EU’s approach is based on four elements: 1) reopen collaboratively, 2) support workers and business, 3) show solidarity, and 4) cooperate in developing and disseminating treatments and a vaccine. The crisis is far from over – although perhaps not as far away as the Commission forecasts – but now it is possible to see, and evaluate, a way forward.   

What does this mean for business?

  • We can expect to receive clarity in the coming days on the pace and scope of Europe’s reopening.  
  • Businesses will find it easier to get relief – in the form of state aid or the relaxing of requirements – but these will come with restrictions (e.g. government shares, restrictions on dividends).  Governments will turn to businesses to help rebuild economies, including by co-investing in strategic areas.   
  • The EU’s injection of liquidity will bolster banks and a freshly capitalized unemployment scheme will provide direct support to European citizens. Goods will start to flow across borders more easily, but we should expect significant restrictions on travel for persons well into the future.
  • The absence of the U.S. from international recovery efforts threatens Europe’s recovery and raises the specter of a fresh trade war.

Communication with EU institutions and respective member state governments will be even more important than before the pandemic. Companies will need to demonstrate their contribution to fighting the pandemic, prepare for delays in legislation and regulation not directly related to COVID-19, and be ready for opportunities to help rebuild Europe’s economy.  The Europe that emerges from the COVID-19 crisis will not be the Europe that entered: it will be re-made by people who are active now.

Europe’s Approach and What it Means for Business

The EU’s plan to exit the COVID-19 crisis, after many stumbles and a focus on social distancing, is built on four pillars:

  1. A cautious – and coordinated – reopening of EU economies.

The EU plan emphasizes the need for gradual and local reopenings based on public health conditions (e.g. disease incidence, availability of care). Paired with improved monitoring, this will allow reopening slowly and with local variations, with the understanding that shutdowns will happen rapidly when the disease returns. This approach will work only if EU member states share information and resources – and this is where the European project is the only candidate able to deliver success.

EU countries will experiment, not act in lockstep. This means businesses can advocate locally and nationally for schedules that fit their businesses. Involvement in industries deemed critical will be important, even if businesses need to change their areas of focus. Engagement with workers and community leaders will be important for these messages to be credible.

Businesses with expertise in testing and tracing systems should be engaged in discussions with the Commission and states in which they do business.

  1. Support for workers and businesses.

Money. The EU has injected hundreds of billions of euros into the European economy to protect employment and the financial system.  Businesses can receive large subsidies, especially for producing key equipment, and moratoriums on taxes and other restrictions will bring some relief. 

Negotiations to provide long-term financing to EU governments have stalled, but even the EU’s most frugal states now recognize a deal is needed. The key factor to watch is not the precise instrument but whether states can secure low-cost, long-term financing for essential projects and basic budgetary needs. A compromise approach may emerge even while the fight in principle on corona bonds continues. This approach could be based on the European Central Bank’s support for major infrastructure projects and the Commission’s possible relaxation of state budgetary restrictions.

Markets. Open travel for persons will remain restricted until wide-scale testing and tracing is in place. The internal market for goods, however, is stabilizing, and coordinated procedures at significant border crosses are removing delays. Coordinated procurement should alleviate fear of shortages in crucial equipment, although the distribution of medicines and vaccines will test the system once again.

Industrial Policy. The von der Leyen Commission entered office with a mandate to create European champions. Concerns over disrupted supply chains and inadequate supplies of essential materials have reinforced this interest, with European Council President Charles calling for “strategic autonomy” in key sectors. By late April, the Commission should be expected to relax rules on state aid.  Companies will find it easier to seek support from host governments but will do better if they are contributing to European supply chains. Businesses and investors will also find opportunity to invest alongside the government in strategic areas, including clean and digital technologies and major infrastructure projects.

  1. Renewed solidarity.

EU governments are – hesitantly – starting to coordinate in procuring essential health equipment and this will be the pattern for the EU going forward. Look for the EU to use this precedent to increase coordination in other fields and procurement needs.

Buying. The EU has focused on coordinating buyers of essential health equipment, organizing four joint procurements and establishing a European stockpile. (The focus on buyers differs from the U.S. debate about whether to compel sellers.)  Approximately €6 billion has been set aside to assist buyers unable to procure on their own.

Giving. €20 billion was announced for assistance to the EU’s partners on April 13 and French President Emmanuel Macron has spoken about the importance of taking more measures to support Africa.  Refugees are a community in need of special protection.  The possible breakdown of the Turkey-EU arrangement on refugees raises the risk of political problems across the continent.

  1. Cooperation in developing and disseminating treatments and vaccine.

The EU is beginning the long-term work of finding a vaccine that will end the crisis. A Commission-hosted pledging conference on May 4 will seek to raise €8 billion for vaccine research. This will test Europe’s ability to collect and direct resources for a global problem.  We expect multiple paths toward treatment and a vaccine (ASG is supporting the Coalition for Epidemic Preparedness and Innovation, or CEPI); the diversity will be a strength.


Serious obstacles remain. Travel will be slow to return, and states will try to close borders each time shortages occur or the disease recurs. Disagreements between northern and southern Europe will intensify once attention turns to recovery. Tension with Washington, which has maintained its pre-pandemic slate of grievances, will frustrate cooperation.  Chief among the challenges is the coronavirus itself.  Resurgence, especially during the first reopening, will send activity and confidence plummeting.  Only strong political leadership – lacking so far – will address these problems.

One bright spot is that the EU’s timelines are conservative.  They assume repeated shutdowns broken only by methods both old (quarantine) and not yet invented (vaccines).  A reliable regimen of testing, tracing and treating individuals should allow for reopening with more confidence, if enough countries are part of the system.

Autocratic states, especially Hungary, will seek to show that the EU is failing. This may increase popularity at home but will likely prove unsuccessful.  The EU could in turn use this crisis to test its leverage (funding, especially) over misbehaving states.  Its typical preference for persuasion over time will invite more bad behavior.

The ability to stimulate production in a timely fashion remains a question.  Personal protective equipment (PPE) is still coming online as the pandemic crests, and medicines and vaccines are not yet coordinated. 

The greatest challenge is political leadership.  Commission President Ursula von der Leyen is emerging as the primary spokesperson at European levels but has not yet shown the ability to harness Europe’s more recalcitrant leaders or to build a stable coalition of constructive leaders. Germany, France, and Italy will be central to this partnership. 

The U.S.' Role

America is serving as the backbone of the global financial response, with the Federal Reserve (not the Trump administration) supporting dollar-backed trades around the globe. 

In responding to medical and political facets of the pandemic, however, the United States has been absent, possibly even destructive. This is unprecedented since the end of WWII and will have lasting effects if unchanged. 

The U.S.’ absence puts at risk integrated global markets. Transatlantic trade, and trade throughout the OECD, will be at risk until there is transparency and coordination on public health measures. 

As our senior adviser Phil Gordon, along with Jeremy Shapiro of the European Council on Foreign Relations, notes in an excellent analysis,  the pandemic is likely to intensify tensions in the transatlantic relationship.

Japan and Korea can play roles in working with Europe on a global response, creating conditions for the U.S. to join later. China has not yet shown the ability to build such a global coalition.

About ASG

Albright Stonebridge Group (ASG) is the premier global strategy and commercial diplomacy firm. We help clients understand and successfully navigate the intersection of public, private, and social sectors in international markets. ASG’s worldwide team has served clients in more than 120 countries.

ASG's Europe & Eurasia practice has extensive experience helping clients navigate markets across Europe and Eurasia. For questions or to arrange a follow-up conversation please contact Chris Maroshegyi.