Explanatory Memorandum to COM(2020)469 - 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

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dossier COM(2020)469 - Proposal to grant temporary support under Council Regulation 2020/672 to Latvia to mitigate unemployment risks in an ...
source COM(2020)469 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 3 August 2020, Spain requested Union financial assistance under the SURE Regulation. In accordance with Article 6(2) of the SURE Regulation, the Commission has consulted the Spanish authorities to verify the sudden and severe increase in actual and planned expenditure directly related to its short-time work for employees, similar schemes specifically targeted at self-employed and workers in the tourism sector, and health benefits for workers infected by COVID-19, caused by the COVID-19 pandemic. In particular, it concerns:

(a)         a wage compensation of up to 70 per cent of the employees’ basic salary for

employees furloughed under the short-time work scheme ‘ERTE’ (‘Expediente de Regulación Temporal de Empleo’). The compensation is capped at a maximum of EUR 1 098.09 per month, which may be increased to EUR 1 254.96 per month or EUR 1 411.83 per month, depending on the beneficiary's number of dependent

children.

(b)

a full or partial social security contribution exemption, depending on the employers size, and the month of the year, in respect of employees participating in ‘ERTE’. The exemption consists in foregone revenues for the government, which for the purpose of the implementation of Council Regulation 2020/672 can be considered equivalent to public expenditure.

(c)          a benefit for the ‘cessation of activity’ (that is to say, the suspension, in full or in part of self-employed activity) and accompanying social security contribution exemptions. The measure provides monthly payments whilst businesses are required to be closed or, if opened, where turnover has been reduced by more than 75%.

(d)          a benefit for ‘permanent seasonal workers’ in the tourism sector who have not been able to return to their activity on the scheduled dates

(e)          an exemption for employers from payment of social security contributions (by 50%) to support ‘employment conservation in the tourism sector’ during the state of emergency and beyond, while maintaining a minimum level of social protection for several categories of workers. An average of total monthly expenditure and the number of persons for whom companies have received subsidies gives an average expenditure per person per month of approximately EUR 192.

(f)          health benefits for workers absent due to COVID-19 (either in preventive isolation or infected workers). The measure is similar to the scheme for accidents at work (that is to say, the benefits are more generous and are paid by the Social Security Fund as of the first day of leave), with benefits capped at 75% of the basic salary.

Spain 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 Spain 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

1.

CONSULTATIONS


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.