EU stress tests for member states health systems

Carlos Closa Montero

17 de Abril de 2020, 11:25

Crises must be used to learn, and the 2008-2012 fiscal/financial crisis offers some lessons for the current health crisis. In 2009, the diagnosis of the financial crisis pointed (among other factors) to the weakness of some European banks. Lack of enough core capital made them extremely vulnerable, thus contaminating the rest of the productive system and also the states themselves. In response, the European Banking Authority (EBA) introduced the so-called "stress tests", which consist of an assessment of the capacity to respond to highly unfavourable hypothetical conditions (economic contraction, defaults, etc.) and seek to identify whether a bank has sufficient capitalisation to withstand such unexpected crises.

We could greatly benefit in the current health crisis caused by COVID-19 if we draw inspiration from that solution and introduce EU level stress tests for Member States' health systems. These test may look at two aspects revealed by the crisis. On the one hand, the unexpectedness of the epidemia took by surprise health systems whose response capacity was in many cases severely surpassed. On the other hand, health systems, however robust they may be, have suffered from the (occasionally devastating) effects of the pandemia. The rationale for an EU level approach is clear: by definition, pandemics know no borders, and indeed there exists proposals to improve global health policy (here and here). At the closer regional European scale, the capacity of a member state to externalise the effects of public policies to its EU partners is an inherent feature of the very existence of the Union and its single market. Therefore, improving the preparedness of each and every national health system has value for all EU states (as well as globally). Conducting stress tests would contribute to improving preparedness and responsiveness, as well as health capabilities themselves and provide a EU common good. 

What would such stress tests consist of? Health policy and public health specialists are better equipped to determine their content. Their aim should be to ensure sufficient capacity to deal with health disasters. My suggestion goes only in the direction of proposing the instrument and arguing its feasibility: although the primary competence for health protection is national, EU treaties offer sufficient basis for action (Articles 168 TEU and 114 TFEU) and, additionally, enhanced cooperation could be activated, allowing the (eventually strengthened) Consumers, Health and Food Executive Agency, (CHAFEA) to take the lead. 

Stress testing could be modelled on existing mechanisms, either the national budgetary plans within the Stability and Growth Pact or the newly created instrument for monitoring compliance with the rule of law, the Annual Rule of Law Report. Whilst a mandatory character of these tests may be questionable, they could act as incentives if necessary adaptations  of national health systems were to be funded out of the Community budget. The model for this could well be the recently created Just Transition Mechanism which finances the reduction of CO2 emissions, giving more funds to those most in need (i.e. the largest polluters). Furthermore, the necessary reforms not financed by the European budget and involving public expenditure, could be excluded from the calculation of the national public deficit, as it agreed in the current emergency. This is not at all foreign to the spirit of the Stability Pact: the Regulation on the surveillance of budgetary positions and the surveillance and co-ordination of economic policies already foreses, with attention to the interests and needs of Germany a decade ago, that structural reforms (such as pension scheme reforms) should be taken into account in judging deviations from medium-term budgetary stability objectives. Therefore, stress tests could be accompanied by an appropriate revision of the Stability Pact. Stress tests are, of course, neither a substitute nor an alternative to other mechanisms that are indispensable for exiting from the crisis. But they can become a useful instrument produced from our learning about it.

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