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(1) In order to contain the spread of COVID-19, which on 11 March 2020 was declared a pandemic by the World Health Organization, Member States have adopted a set of unprecedented measures.

(2) The unprecedented measures taken in response to the exceptional situation caused by COVID-19, which is beyond the control of Member States, have caused significant disturbances to economic activity which are reflected in a steep decline in gross domestic product and a significant impact on employment, social conditions, poverty and inequalities. In particular, those measures have disrupted supply chains and production and caused absences from the workplace. In addition, the provision of many services has become very difficult or impossible. At the same time, consumer demand has dropped. Many businesses are experiencing liquidity shortages, and their solvency is at risk, while the financial markets are very volatile. Key sectors like travel and tourism are particularly hard hit. More broadly, those measures have already led or will lead to severe deterioration of the financial situation of many businesses in the Union.

(3) The crisis caused by COVID-19 has spread quickly in the Union and in third countries. A sharp contraction of growth in the Union is foreseen for 2020. Recovery risks being very uneven in different Member States, increasing the divergence between national economies. The different fiscal abilities of Member States to provide financial support where it is needed most for recovery and the divergence between Member States’ measures endanger the single market as well as social and territorial cohesion.

(4) A comprehensive set of measures is needed for economic recovery. That set of measures requires substantial amounts of public and private investment to set the Union firmly on the path towards a sustainable and resilient recovery, create high-quality jobs, support social inclusion and repair the immediate damage brought by the COVID-19 crisis, whilst supporting the Union’s green and digital priorities.

(5) The exceptional situation caused by COVID-19, which is beyond the control of Member States, calls for a coherent and unified approach at Union level. In order to prevent further deterioration of the economy, employment and social cohesion and to boost a sustainable and resilient recovery of economic activity, an exceptional and coordinated programme of economic and social support should be put in place, in a spirit of solidarity between Member States, in particular for those Member States that have been particularly hard hit.

(6) As this Regulation is an exceptional response to temporary but extreme circumstances, the support provided under it should only be made available for the purposes of addressing the adverse economic consequences of the COVID-19 crisis or the immediate funding needs to avoid a re-emergence of the COVID-19 crisis.

(7) The support under the instrument established by this Regulation (the ‘Instrument’) should in particular focus on measures to restore labour markets and social protection as well as health care systems, to reinvigorate potential for sustainable growth and employment in order to strengthen cohesion among Member States and support their transition towards a green and digital economy, to provide support to businesses affected by the impact of the COVID-19 crisis, in particular small and medium-sized enterprises, as well as support for investment in activities that are essential for strengthening sustainable growth in the Union including direct financial investment in enterprises, measures for research and innovation in response to the COVID-19 crisis, for capacity building at Union level to enhance future crisis preparedness, for maintaining efforts to ensure a just transition to a climate-neutral economy, and support for agriculture and development in rural areas in addressing the impact of the COVID-19 crisis.

(8) To ensure a sustainable and resilient recovery throughout the Union and facilitate the implementation of economic support, the established mechanisms of spending through Union programmes under the multiannual financial framework are to be used. Support under those programmes is to be provided in the form of non-repayable support, loans, and provisioning for budgetary guarantees. The allocation of financial resources should reflect the extent to which those programmes are capable of contributing to the objectives of the Instrument. Contributions to those programmes under the Instrument should be subject to strict compliance with the objectives of the Instrument, which are linked to supporting recovery in the aftermath of the COVID-19 crisis.

(9) In view of the nature of the measures to be financed, one part of the amounts available under the Instrument should be used for loans to Member States, whereas the other part of the amounts should constitute external assigned revenue for the purpose of Article 21(5) of Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council (the ‘Financial Regulation’) and should be used for non-repayable support, support through financial instruments or provisioning for budgetary guarantees and related expenditure by the Union. To that effect, as part of the necessary measures under this Regulation, it is appropriate to enable Article 21(5) of the Financial Regulation to comprise the assigning under this Regulation, as a basic act, of a part of the revenue provided for under the exceptional and temporary empowerment provided for in the Council Decision on the system of own resources of the European Union and repealing Council Decision 2014/335/EU, Euratom (the ‘Own Resources Decision’).

(10) While point (c) of Article 12(4) and Article 14(3) of the Financial Regulation apply to commitment and payment appropriations made available in relation to the external assigned revenue under this Regulation, in view of the time limits set for the different types of support, commitment appropriations resulting from that external assigned revenue should not be automatically carried over beyond the respective end dates, except for commitment appropriations necessary for technical and administrative assistance for implementation of the measures set out in the Instrument.

(11) Commitment appropriations for non-repayable support should be made available automatically up to the authorised amount. Liquidity should be managed effectively, so that funds are raised only when legal commitments need to be honoured through corresponding payment appropriations.

(12) Given the importance of using the amounts during the first years of the implementation of the Instrument, it is appropriate to review the progress achieved in the implementation of the Instrument and the use of the support allocated in accordance with this Regulation. To that effect, the Commission should prepare a report by 31 October 2022.

(13) Article 135(2) of the Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community (the ‘Withdrawal Agreement’) provides that amendments to Decision 2014/335/EU, Euratom that are adopted on or after the date of entry into force of the Withdrawal Agreement are not to apply to the United Kingdom insofar as those amendments have an impact on the United Kingdom’s financial obligations. The support under this Regulation and the corresponding increase of the own resources ceiling of the Union would have an impact on the United Kingdom’s financial obligations. Article 143(1) of the Withdrawal Agreement limits the liability of the United Kingdom for its share of the contingent financial liabilities of the Union to those contingent financial liabilities of the Union arising from financial operations taken by the Union before the date of entry into force of the Withdrawal Agreement. Any contingent financial liability of the Union arising from support under this Regulation would be subsequent to the date of entry into force of the Withdrawal Agreement. Therefore, this Regulation should not apply to and in the United Kingdom,