European emergency health fund is needed to limit the impact of future crises

Simon Ashby

By Simon Ashby

Professor of Financial Services

Dimitrios Kolokas

By Dimitrios Kolokas

Doctoral Researcher, Accounting and Finance

David Veredas

By David Veredas

Professor of Financial Markets

27 November 2020

A key lesson that needs to be learned from the Great Lockdown Crisis of 2020 is the need for deeper union across the European health care sector. Though we do not know when the next heath crisis will strike, COVID-19 is unlikely to be the last.


The unprecedented public health crisis caused by COVID-19 overstretched the structures and mechanisms of the European Union, in particular those that deal with emergencies. In order to be ready for the next health emergency, the EU needs effective and unified health emergency response arrangements, and collaboration between member States. It also needs a significant financial cushion for rapid and predictably increasing funding.

Professor David Veredas, Professor Simon Ashby and doctoral researcher Dimitrios Kolokas propose the creation of an Emergency Health Financing Facility (EHFF). This complements existing structures in the EU without compromising the EU budget nor the public finances of member States, which are going to be under serious strain for the years to come. It also adds a new layer of financial innovation: securitizing health emergency risks in the form of fixed income securities that are sold to institutional investors.

The EHFF finances can be used for ramping up medical supplies, testing kits, building infrastructures, and sudden increases of personnel, amongst others, while also complimenting existing structures like rescEU and the Emergency Support Instrument. It will enhance cooperation and solidarity within the EU, which is essential to overcome the effects of a systemic health emergency, without increasing the burden on Member State finances.

David Veredas, Professor of Financial Markets at Vlerick Business School, and co-author of the proposal, says, “The last systemic crisis was in 2008 – 2011 and brought several EU countries to the brink of default. Pre-existing structures were not sufficient to avert disaster, lessons were learned, and regulation was brought in order to stop this happening again. We must do the same with this crisis if we are currently experiencing, as this time the magnitude is even greater given its focus is on public health”.

Specifically the EHFF is a health risk management tool that provides liquidity when it is most needed, and without allocating large amounts of cash in advance. It will have positive spill overs on the public finances of EU countries, says the researcher, in the sense that Member States will be better off, as part of the EHFF, than managing the risk of a health emergency individually.

The EHFF is therefore a cost-effective solution that protects national budgets from the impacts of health emergencies, and allows all Member States to have the funding to tackle these future crises, without burdening public finances.

The current EU systems for dealing with this emergency are not enough, and have not worked efficiently. The crisis is being resolved with an unprecedented EU-debt funded recovery fund and the largest EU budget ever. In order to stop Member States being completely overwhelmed by this crisis both from a healthcare point of view, and economically too, we have to learn from our mistakes, and install a financing facility for future crises”, says Professor Veredas.

Want to read more? Download the full policy paper ‘An emergency health financing facility for the European Union – a proposal’.

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David Veredas

David Veredas

Professor of Finance and Sustainability