Explanatory Memorandum to COM(2021)825 - Amendment of Implementing Decision granting temporary support to Hungary to mitigate unemployment risks in the emergency following the COVID-19 outbreak

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dossier COM(2021)825 - Amendment of Implementing Decision granting temporary support to Hungary to mitigate unemployment risks in the emergency ...
source COM(2021)825 EN
date 21-12-2021


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 23 October 2020 the Council granted financial assistance to Hungary 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 1 December 2021, Hungary requested again 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 measures caused by the COVID-19 pandemic. In particular, these measures pertain to a combination of a new measure and existing measures referred to in Council Implementing Decision (EU) 2020/1561:

(a)an existing 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 was extended until the end of state of emergency, with expenditure covering the period from December 2020 until June 2021.

(b)an existing 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, was extended until the end of the state of emergency, with expenditure covering the period from December 2020 until June 2021. Only the part of the total expenditure related to companies that reduce or suspend working time or when the employees are continuously in employment up to the latest available outturn data has been requested.

(c)an existing exemption from the lump sum tax ("KATA") regime, for the period from March to June 2020 for small tax-payers in certain sectors, was extended until the end of state of emergency, with expenditure covering March and April 2021. Only the part of expenditure related to the support of self-employed and one-person companies has been requested. 

(d)a new one-off income support scheme for self-employed in sectors affected by lockdown measures under the condition that they maintain their activities for at least two months after the prospective end of the state of emergency. The one-time payment amounts to the monthly guaranteed minimum wage (HUF 219 000). The eligibility period terminates with the end of the state of emergency. The target group of the scheme are sole entrepreneurs that do not have employees, which are not eligible for support under the sectoral wage scheme.

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.

• 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 (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.