Explanatory Memorandum to COM(2021)104 - Proposal for a COUNCIL IMPLEMENTING DECISION granting temporary support under Regulation 2020/672 to Estonia to mitigate unemployment risks in the emergency following COVID-19

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dossier COM(2021)104 - Proposal for a COUNCIL IMPLEMENTING DECISION granting temporary support under Regulation 2020/672 to Estonia to mitigate ...
source COM(2021)104 EN
date 26-02-2021


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 4 February 2021, Estonia requested Union financial assistance under the SURE Regulation. In accordance with Article 6(2) of the SURE Regulation, the Commission has consulted the Estonian authorities to verify the sudden and severe increase in actual and planned expenditure directly related to short-term labour market schemes and similar measures and health related measures caused by the COVID-19 pandemic. In particular, it concerns:

(a) a short-term labour market scheme for the preservation of jobs. The objective was to support private sector employees whose salaries/wages or working hours had been temporarily reduced because of the substantial impact of the emergency situation by providing employees with up to 70% of the employee’s average monthly salary or wages, capped to EUR 1000 per employee per month. It concerns a temporary measure for the period of the emergency situation from March to May 2020. Given the continued impact of the emergency situation on employment, the furlough scheme was prolonged to apply in June 2020 and its conditions were adjusted so that the government support to an employee was reduced to up to 50% of the employee’s average monthly salary or wages and capped to EUR 800 per employee. In order to receive the government support for employees, companies had to pay at least EUR 150 (on gross basis) per employee per month, so that each employee received a monthly earnings of at least EUR 584, which is equal to the minimum wage.

(b) an allowance for the preservation of earnings for parents who during the emergency situation had to suspend work to take care of their children with special educational needs. It was a temporary measure for the period of the emergency situation from 12 March to 17 May 2020. The allowance was calculated on the basis of social tax paid on a respective parent's salaries or wages in 2019. The support covered 70% of an average daily salary or wages of one parent.

(c) a short-term labour scheme for freelance artists, sports coaches and heads of choirs and dance groups. It was a temporary scheme for the period of the emergency situation from 1 March to 31 May 2020. Freelance artists were supported in an amount equal to the minimum wage for a period of two months. Heads of choirs and folk dance groups and sports coaches were provided with government support that represented 70% of average salary or wages for the period from October 2019 to February 2020, capped at EUR 1000 per employee per month. Sports coaches were supported in the amount of 50% of their regular salary/wages, the other 50% being paid by sports organisation.

(d) a health related measure consisting of public expenditure on personal protective equipment and additional general supplies and consumables.

(e) a short-term support scheme for hospitals to compensate for the costs of hiring temporary staff for COVID-19 units and intensive care units, and paying for extended working hours for doctors, nurses and other staff. It covered the costs of an additional need for staff in COVID-19 units and intensive care units in hospitals. The additional staff was hired with higher salary (coefficient 2.0) to keep the staff motivated during the emergency situation.

(f) a compensation for employees for the first three days of sick leave for the period of the emergency situation from 13 March to 17 May 2020. The increased use of sick and care leaves due to COVID-19 was compensated for persons insured by the Estonian Health Insurance Fund for the first three days of sickness (which are normally paid by the employee).

Estonia 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 Estonia 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 (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 2020.

• 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 (EU) 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.