Explanatory Memorandum to COM(2020)468 - Proposal to grant temporary support under Council Regulation 2020/672 to Latvia to mitigate unemployment risks in an emergency situation following the COVID-19 outbreak - Main contents
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| dossier | COM(2020)468 - Proposal to grant temporary support under Council Regulation 2020/672 to Latvia to mitigate unemployment risks in an ... |
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| source | COM(2020)468  |
| 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, Latvia requested Union financial assistance under the SURE Regulation. In accordance with Article 6(2) of the SURE Regulation, the Commission has consulted the Latvian authorities to verify the sudden and severe increase in actual and planned expenditure directly related to a scheme for the compensation of idle workers, and its related expenditure -the downtime allowance and the workers’ bonus for children-, a scheme for wage subsidies for the export industry, wage support payments for medical professionals and workers in the cultural industry, as well as health related expenditure on protective personal equipment and COVID-19 related sickness benefits caused by the COVID-19 pandemic. In particular, it concerns:
a scheme for the compensation of idle workers. The scheme pays wages to employees of private sector companies who have been furloughed. It covers between 50% and 75% of employees’ salaries, depending on the size of the business, with a cap of EUR 700 per employee per month. Attached to the scheme for the compensation of idle workers are the related downtime allowance scheme and workers’ bonus for children. The downtime allowance scheme provides a minimum benefit to furloughed employees or self-employed persons who either do not qualify for support under the scheme for the compensation of idle workers due to reasons unrelated to the employee, or receive less than EUR 180 from it. The benefit ensures a minimum level of support is provided, ensuring that all employees or self-employed persons receive a benefit of no less than EUR 180 per month. The bonus for children scheme provides additional support to furloughed employees who have dependent children.
a scheme for wage subsidies for the tourism and export industries, which is a continuation of the idle workers scheme aimed specifically at tourism and exporting industries. The measure is dependent on the recipient proving that the resources will be used to cover salary costs.
(3)
(4)
two wage support payments targeted at medical professionals and workers in the cultural industry. The wage support payments provide grants to the medical and cultural industries in order to support the payment of wages whilst workers are furloughed. Both schemes are conditional on the grants being used to cover salary costs.
health related expenditure on personal protective equipment and other medical supplies to ensure the health and safety of public sector employees, in particular, healthcare workers.
COVID-19 related sickness benefits, whereby the government paid the sick leave
support to people who had to miss work due to a requirement to self-isolate or self-
quarantine. Normally, part of the sickness benefit would have to be paid by the employer, whereas under this scheme the state paid the entire cost.
Latvia 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 Latvia under the SURE Regulation in support of the above measures.
• 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
ANDIMPACTASSESSMENTS
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 financia 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.