Explanatory Memorandum to COM(2021)167 - Amendment of decision 2020/1352 granting temporary support to Cyprus to mitigate unemployment risks in the emergency following the COVID-19 outbreak

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dossier COM(2021)167 - Amendment of decision 2020/1352 granting temporary support to Cyprus to mitigate unemployment risks in the emergency ...
source COM(2021)167 EN
date 29-03-2021


1. CONTEXTOFTHE 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 25 September 2020 the Council granted financial assistance to Cyprus with a view to complementing its national efforts to address the impact of the COVID-19 outbreak and respond to the socioeconomic consequences of the outbreak for workers and the self-employed.

On 10 March 2021, Cyprus made a new request for Union financial assistance under the SURE Regulation.

In accordance with Article 6(2) of the SURE Regulation, the Commission has consulted the Cypriot authorities to verify the sudden and severe increase in actual and planned expenditure directly related to Cyprus’ labour market measures and health-related measures and caused by the COVID-19 pandemic. In particular, the increased expenditure for which additional financial assistance is requested pertains to existing measures referred to in Council Implementing Decision (EU) 2020/1344:

(a) the special leave scheme, which provides wage compensation to parents working in the private sector who have children up to the age of 15 or children with disabilities of any age. The measure, initially in force for the period February 2020 to June 2020, was extended from January 2021 to May 2021;

(b) the scheme supporting companies for total suspension of operations, which provides wage compensation to up to 97% of the employees of the businesses forced to suspend their operations, conditional on employment retention. The compensation covers 60% of the employee's salary or 60% of the employee's social insurance units earned in 2018 (2019 for the period from July 2020 to August 2020), whichever is the greater. The compensation ranges between a maximum of EUR 1 214 and a minimum of EUR 360 per month. The measure, initially in force for the period March 2020 to August 2020 was extended from September 2020 to May 2021;

(c) the scheme supporting companies for partial suspension of operations, which provides wage compensation to the employees of businesses experiencing a decline in turnover due to the pandemic, conditional on employment retention. The compensation covers 60% of the employee's salary or 60% of the employee's social insurance units earned in 2018, whichever is the greater. The compensation ranges between a maximum of EUR 1 214 and a minimum of EUR 360 per month. The measure, initially in force for the period March 2020 to June 2020, was extended from January 2021 to May 2021;

(d) the ‘special scheme for self-employed’, which provides compensation to self-employed persons who cannot exercise any activity according to the decree of the Minister of Health and/or a decision of the Council of Ministers. The measure,

initially in force for the period March 2020 to June 2020, was extended from July 2020 to May 2021;

(e) the ‘special scheme for hotel units and tourist accommodation’, which provides wage compensation to support employees in the hotel industry and other businesses providing tourist accommodation whose employer has fully suspended their operations or experienced a decline in turnover of more than 40%. Participation in the scheme is conditional on employment retention. The measure, initially in force for the period June 2020 to October 2020, was extended from November 2020 to May 2021;

(f) the ‘special scheme to support businesses related to the tourism industry or affected by tourism or associated with businesses that are subject to mandatory total suspension’, which provides wage compensation to the employees in those businesses that have fully suspended their operations or experienced a decline in turnover of more than 40%, as opposed to 55% in the original scheme, conditional on employment retention. The measure, initially in force for the period June 2020 to August 2020, was extended and amended from September 2020 to May 2021;

(g) the subsidisation scheme for very small and small enterprises and self-employed who employ up to 50 employees, which provides a lump sum grant to support operating expenses of small businesses and the self-employed. The amounts of the lump-sump grants have been reviewed for various categories of businesses based on the number of employees. In addition, grants have been agreed for businesses, which suspended their operations since March 2020 with an amount of EUR 10 000 for up to 9 employees and EUR 15 000 for more than 9 employees. The measure, initially in force for the period April 2020 to May 2020, was extended and amended for November 2020;

(h) the ‘sickness benefit scheme’, which provides wage compensation to employees of

the private sector and self-employed, on the condition that they are either classified as vulnerable individuals according to a list published by the Ministry of Health, placed in quarantine by the Authorities, or infected by Covid-19. The measure, initially in force for the period March 2020 to June 2020, was extended from November 2020 to May 2021;

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

Health-related measures, as requested by Cyprus on 10 March 2021, amount to EUR 440 000.

• 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. LEGALBASIS, SUBSIDIARITYAND 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 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 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.

1.

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.