Explanatory Memorandum to COM(2020)651 - Proposal granting temporary support under Regulation 2020/672 to Hungary to mitigate unemployment risks in the emergency following the COVID-19 outbreak

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dossier COM(2020)651 - Proposal granting temporary support under Regulation 2020/672 to Hungary to mitigate unemployment risks in the emergency ...
source COM(2020)651 EN
date 07-10-2020


1. CONTEXT OF THE PROPOSAL

• Reasons for and objectives of the proposal


Council Regulation (EU) 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 6 August 2020, Hungary requested Union financial assistance under the SURE Regulation. In accordance with Article 6(2) of the SURE Regulation, the Commission has consulted the Hungarian authorities to verify the sudden and severe increase in actual and planned expenditure directly related to Hungary’s labour market and health-related measures caused by the COVID-19 pandemic. In particular, these measures pertain to:

(a)a temporary support for upgrading accommodation (conversion, expansion, renovation of premises, acquisition of equipment) in tourist destinations in order to retain the existing workforce. Only the part of expenditure related to the support of self-employed and one-person companies has been requested.

(b)a one-off grant support for food-processing companies, horticultural companies in the sectors of growing non-perennial crops and of plant propagation, and fish farming companies respectively. The support is conditional on the entity maintaining their employees until December 2020.

(c)child care benefits to employees and the self-employed, which would have expired due to age restrictions between 11 March 2020 and 30 June 2020, the period of the state of danger.

(d)an exemption from the employers’ social security contributions and training levy for the period from March to December 2020 as well as a reduction in the employers’ rehabilitation contribution tax for the period from March to June 2020 for the sectors most hit by the pandemic. The part of the total expenditure related to companies that reduce or suspend working time or when the employees were continuously in employment up to the latest available outturn data has been requested.

(e)an exemption from the lump sum tax ("KATA") regime, for the period from March to June 2020 for small tax-payers in 26 activities. Only the part of expenditure related to the support of self-employed and one-person companies has been requested.

(f)an exclusion of personnel costs from the tax base of the small enterprise tax ("KIVA"), for the period from March to June 2020 in the sectors most hit by the pandemic. The part of the total expenditure related to companies that reduce or suspend working time or when the employees were continuously in employment up to the latest available outturn data has been requested.

(g)a one-off lump sum benefit of HUF 500,000 per person for healthcare workers as an acknowledgment of their extra work during the pandemic.

(h)borne by the state costs of state-owned companies, linked to special measures to control the pandemic. Such health-related measures include cleaning and the provision of protective equipment.

(i)increase in costs for special measures to control the pandemic (such as daily disinfection services,as well as multiple cleaning of ventilation systems and elevators) and to protect the personal health of state officials with disinfectants and protection tools. Such measures have been introduced by the Directorate General for Public Procurement and Supply (KEF) to ensure the continuous functioning of state budgetary bodies.

(j)measures related to infrastructures and investments in hospitals in order to allow for a high level of protection of healthcare workers and patients. The measures include dedicated medical examination rooms and isolated COVID wards. Additionally, direct costs of personal protection tools and equipment (single use facemasks, medical cloaks, plastic shields, gloves, disinfectants, etc.) in hospitals and other healthcare institutions have increased in order to allow for a high level of protection of healthcare workers.

Hungary 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 Hungary under the SURE Regulation in support of the measures above.

Health-related measures, as requested by Hungary, amount to EUR 268 550 000. This represents more than half of the total requested amount of financial support. Given the need to ensure the ancillary nature of this category of measures, the amount of the financial assistance in support of health-related measures will be limited to EUR 247 124 000, so that the amount represents less than half of total financial assistance.

• Consistency with existing policy provisions in the policy area

The present proposal is fully consistent with Council Regulation (EU) 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. LEGAL BASIS, SUBSIDIARITY AND 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 CONSULTATIONS AND IMPACT ASSESSMENTS

• 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.

• Impact assessment

Due to the urgent nature of the proposal, no impact 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.