Explanatory Memorandum to COM(2022)509 - Amendment of Implementing Decision (EU) 2020/1345 granting temporary support to the Czech Republic to mitigate unemployment risks following the COVID-19 outbreak

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dossier COM(2022)509 - Amendment of Implementing Decision (EU) 2020/1345 granting temporary support to the Czech Republic to mitigate unemployment ...
source COM(2022)509 EN
date 03-10-2022


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 7 August 2020, Czechia requested financial assistance from the Union and on 25 September 2020, with its Implementing Decision (EU) 2020/1345, the Council granted financial assistance to Czechia 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 22 September 2022, Czechia requested again Union financial assistance under the SURE Regulation.

In accordance with Article 6(2) of the SURE Regulation, the Commission has consulted the Czech authorities to verify the sudden and severe increase in actual and planned expenditure directly related to Czechia’s labour market measures caused by the COVID-19 pandemic. In particular, this pertains to existing measures referred to in Council Implementing Decision (EU) 2020/1345:

(a)the short-time work scheme known as the ‘Antivirus’ Programme. The programme was designed to partially compensate wage costs of private employers forced to suspend or significantly scale down their economic activity as a direct consequence of measures taken by the authorities (Option 'A'), or indirectly due to adverse economic effects of the pandemic (Option 'B'), for example employees not able to work due to travel restrictions. Option 'A plus' has been introduced in October 2020 in order to provide full compensation of wage costs to employers forced to suspend or scale down their activity due to measures taken by the authorities. There have been several prolongations of the programme and its sub-programmes. Option 'A' was active from 12 March 2020 until 28 February 2022, Option 'A plus' from 1 October 2020 until 31 May 2021 and Option 'B' from 12 March 2020 until 31 May 2021 and from 1 November 2021 until 31 December 2021. 

(b)the measures granting compensatory support in the form of tax bonuses for the self-employed. The first one, the ‘Pětadvacítka’ Programme, provides the self-employed with a compensation bonus of CZK 500 in the form of a tax bonus per calendar day of the bonus period per person to those who have been forced to suspend or significantly scale down their economic activity beyond normal business volatility due to the COVID-19 public health risks or crisis measures taken by public authorities. ‘Pětadvacítka’ was active from 12 March 2020 until 8 June 2020. The ‘autumn compensatory bonus’ was a de-facto extension with parametric changes to the ‘Pětadvacítka’ programme, that ran from 5 October 2020 until 15 February 2021 and provided tax bonus of CZK 500 per calendar day for self-employed forced to suspend or significantly scale down their economic activity due to public health risks or crisis measures taken by public authorities. The ‘new compensatory bonus for 2021’ programme proposed an increase in the support to CZK 1,000 per day per person and ran from 1 February 2021 to 31 May 2021. The last compensatory bonus for self-employed also amounting to 1,000 CZK per day, called the ‘compensatory bonus for 2022’, ran from 22 November 2021 until 31 January 2022.

(c)the ‘Partial waiver of social and health security contributions due by the self-employed’ who continue in their activity during the provision of support was a scheme under which the state assumes payment of the corresponding contribution due each month from March to August 2020. While the programme ended in August 2020, additional amounts had to be paid in 2021 due to settlements related to advanced payments paid by the self-employed in 2020.

(d)the ‘Care allowance’ for the self-employed compensates for the loss of income incurred by the self-employed as a consequence of the need to take care of children or care-dependent people due to the closure of childcare and social care facilities. The daily amount of support was CZK 424 for March 2020 and CZK 500 for April to June 2020. It was afterwards extended to CZK 400 for the period October 2020 to May 2021.

Czechia 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 Czechia 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.