Explanatory Memorandum to COM(2022)507 - Amendment of Implementing Decision (EU) 2020/1344 granting temporary support to Cyprus to mitigate unemployment risks following the COVID-19 outbreak

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dossier COM(2022)507 - Amendment of Implementing Decision (EU) 2020/1344 granting temporary support to Cyprus to mitigate unemployment risks ...
source COM(2022)507 EN
date 28-09-2022


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, Cyprus requested financial assistance from the Union and on 25 September 2020, with its Implementing Decision (EU) 2020/1344, 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 requested again Union financial assistance under the SURE Regulation. Further to this request, the Council Implementing Decision (EU) 2020/1344 was amended by Council implementing decision (EU) 2021/680 of 23 April 2021.

On 5 September 2022, Cyprus requested Union financial assistance under the SURE Regulation for the third time.

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 caused by the COVID-19 pandemic. In particular, this pertains to existing measures referred to in Council Implementing Decision (EU) 2020/1344:

(a)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 August 2021;

(b)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 its 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 October 2021; 

(c) 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 October 2021;

(d)The ‘special scheme for supporting businesses exercising special predefined activities’ provides wage compensation to the employees or the business facing a decline of at least 55% of their turnover, conditional on employment retention. The measure, initially in force for the period June 2020 to August 2020, was extended from September 2020 to December 2020 and was extended again from December 2020 to October 2021;

(e)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. Only the part of expenditure related to the support of the self-employed and one-person companies has been requested. 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. The scheme was extended again in March 2021 and April 2021, and covered businesses of any number of employees that had to totally suspend their operations according to Decrees of the Minister of Health.

(f) 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 June 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.

• 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.