Explanatory Memorandum to COM(2020)463 - Proposal to grant temporary support under Council Regulation 2020/672 to Lithuania to mitigate unemployment risks in an emergency situation following the COVID-19 outbreak

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dossier COM(2020)463 - Proposal to grant temporary support under Council Regulation 2020/672 to Lithuania to mitigate unemployment risks in an ...
source COM(2020)463 EN
date 24-08-2020


1. CONTEXTOFTHE PROPOSAL

• Reasons for and objectives of the proposal

Council Regulation 2020/672 (“SURE Regulation”) lays down the legal framework for providing Union financial assistance to Member States, which are experiencing, or are seriously threatened with, a severe economic disturbance caused by the COVID-19 outbreak. Support under SURE serves for the financing, primarily, of short-time work schemes or similar measures aimed at protecting employees and the self‐ employed and thus reducing the incidence of unemployment and loss of income, as well as for the financing, as an ancillary, of some health-related measures, in particular in the workplace.

On 7 August 2020, Lithuania requested Union financial assistance under the SURE Regulation. In accordance with Article 6(2) of the SURE Regulation, the Commission has consulted the Lithuanian authorities to verify the sudden and severe increase in actual and planned expenditure directly related to short-time work schemes and similar measure. In particular, it concerns:

a scheme to pay subsidies to employers to cover estimated wages for each employed person facing idle time. The employer could decide whether to avail of subsidies to cover 70% of the salary, up to a maximum of 1.5 times the minimum wage, or 90% of the salary (100% in the case of employees aged 60 and above), up to a maximum of the minimum wage. Employers that have participated in the scheme must retain at least 50 % of their employees for at least 3 months after the pay subsidy ends.

subsidies for employees returning from idle time, for up to six months following their return to work. Subject to a cap of the minimum wage or two times the minimum wage depending on the economic activity performed by the employer, the amount of the subsidies paid in the first and second months following return can be as high as 100% of an employee’s salary, in the third and fourth month, 50% and in the fifth and sixth month, 30%.

benefits for the self-employed, including the self-employed engaged in agricultural activity with an agricultural holding or farm of no less than four economic size units, amounting to EUR 257 a month and paid during the quarantine period and the following two months.

benefits for the self-employed engaged in agriculture with an agricultural holding or farm of less than four economic size units, who were not covered by the aforementioned measure. The measure consists of a one-time payment of EUR 200, for those small farmers who had no other employment, or of EUR 200, for each of the three months of the quarantine and period of state emergency if they were employed, in addition to their self-employed agricultural activity, and earned not more than the minimum wage.

Lithuania provided the Commission with the relevant information.

Taking into account the available evidence, the Commission proposes to the Council to adopt an Implementing Decision to grant financial assistance to Lithuania under the SURE Regulation in support of the above measures.

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• Consistency with existing policy provisions in the policy area

The present proposal is fully consistent with Council Regulation 2020/672, under which the proposal is made.

The present proposal comes in addition to another Union law instrument to provide support to Member States in case of emergencies, namely Council Regulation (EC) No 2012/2002 of 11 November 2002 establishing the European Union Solidarity Fund (EUSF) (“Regulation (EC) No 2012/2002”). Regulation (EU) 2020/461 of the European Parliament and of the Council, which amends that instrument to extend its scope to cover major public health emergencies and to define specific operations eligible for financing, was adopted on 30 March.

• Consistency with other Union policies

The proposal is part of a range of measures developed in response to the current COVID-19 pandemic such as the “Coronavirus Response Investment Initiative”, and it complements other instruments that support employment such as the European Social Fund and the European Fund for Strategic Investments (EFSI)/InvestEU. By making use of borrowing and lending in this particular case of the COVID-19 outbreak for supporting Member States, this proposal acts as a second line of defence to finance short-time work schemes and similar measures, helping protect jobs and thus employees and self-employed against the risk of unemployment.

2. LEGALBASIS, SUBSIDIARITYAND PROPORTIONALITY

• Legal basis

The legal basis for this instrument is Council Regulation 2020/672.

• Subsidiarity (for non-exclusive competence)

The proposal follows a Member State request and shows European solidarity by providing Union financial assistance in the form of temporary loans to a Member State affected by the COVID-19 outbreak. As a second line of defence, such financial assistance supports the government’s increased public expenditure on a temporary basis in respect of short-time work schemes and similar measures to help them protect jobs and thus employees and self-employed against the risk of unemployment and loss of income.

Such support will help the population affected and helps to mitigate the direct societal and economic impact caused by the present COVID-19 crisis.

• Proportionality

The proposal respects the proportionality principle. It does not go beyond what is necessary to achieve the objectives sought by the instrument.

3. RESULTS        OF        EX-POST        EVALUATIONS,        STAKEHOLDER CONSULTATIONSANDIMPACTASSESSMENTS

Stakeholder

consultations

Due to the urgency to prepare the proposal so that it can be adopted in a timely manner by the Council, a stakeholder consultation could not be carried out.


• Im pact assessment

Due to the urgent nature of the proposal, no mpact assessment was carried out.

4. BUDGETARY IMPLICATIONS

The Commission should be able to contract borrowings on the financial markets with the purpose of on-lending them to the Member State requesting financial assistance under the SURE instrument.

In addition to the provision of Member State guarantees, other safeguards are built into the framework in order to ensure the financial solidity of the scheme:

• A rigorous and conservative approach to financial management;

• A construction of the portfolio of loans that limits concentration risk, annual exposure and excessive exposure to individual Member States whilst ensuring sufficient resources could be granted to Member States most in need; and

• Possibilities to roll over debt.