Explanatory Memorandum to COM(2022)562 - Amendment of Implementing Decision (EU) 2020/1351 granting temporary support to Latvia to mitigate unemployment risks following the COVID-19 outbreak

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dossier COM(2022)562 - Amendment of Implementing Decision (EU) 2020/1351 granting temporary support to Latvia to mitigate unemployment risks ...
source COM(2022)562 EN
date 21-10-2022


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, Latvia requested financial assistance from the Union and on 25 September 2020, with its Implementing Decision (EU) 2020/1351, the Council granted financial assistance to Latvia 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 11 March 2021, Latvia requested again Union financial assistance under the SURE Regulation. Further to this request, Council Implementing Decision (EU) 2020/1351 was amended by Council implementing decision (EU) 2021/677 of 23 April 2021.

On 6 October 2022, Latvia 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 Latvian authorities to verify the sudden and severe increase in actual and planned expenditure directly related to Latvia’s labour market measures and health-related measures caused by the COVID-19 pandemic. In particular, this pertains to existing measures referred to in Council Implementing Decision (EU) 2020/1351:

(a)the scope of an existing scheme for the compensation of idle time for workers is broadened in different ways: (i) by extending it towards persons employed in the beauty industry, (ii) by making persons who have changed their tax treatment as from 2021 eligible for the support, (iii) by improving the qualifying conditions for the patent payers and (iv) by allowing the beneficiaries to choose between two qualifying criteria to apply for the support. The scheme pays compensations to furloughed employees or self-employed persons of 50% or 70% of their salaries or incomes, depending on the tax regime under which they operate. The minimim level of support is set at EUR 500 and the maximum at EUR 1 000 per employee per calendar month. The scheme applies to companies, self-employed persons and payers of the licence fee, whose income from economic activity has decreased by at least 20% as compared to August-October 2020 on average. 

(b)attached to the scheme for the compensation of idle time for workers is an existing scheme for the workers’ bonus for children which provides additional support to furloughed employees who have dependent children. The bonus amounts to EUR 50 per month per child.

(c)an existing scheme for wage subsidies extends the support period until 28 February 2022, expands the scope of eligibility by allowing the beneficiaries to choose between two qualifying criteria to apply for the support, removes the risk of overcompensation, clarifies eligibility restrictions for patent payers as well as limits eligibility for support from October 2021 to February 2022 to persons owning COVID-19 certificate attesting to vaccination against COVID-19 or the fact of illness. The support is available to employers facing decrease in revenue from any economic activity by at least 20%. The scheme amounts to 50% of the average monthly gross wage, but not more than EUR 500 per calendar month. The beneficiary employers are obliged to maintain employment of supported workers and to top-up the wage subsidy to the full regular wage.

(d)an existing Covid-19 related sickness benefit is extended until 28 February 2022 and restricted to persons owning an COVID-19 vaccination or disease certificate or who have received an opinion on the need to postpone vaccination against Covid-19. The government pays fully the sick leave benefit to people who had to miss work due to a requirement to self-isolate or self-quarantine, while normally, a part of the sickness benefit is shared with employer.

(e)an existing measure consisting of sickness aid benefits for parents and caretakers provides support for employees who cannot work remotely and have to attend for children until the age of 10 or for persons with disabilities, when schools and day-care centres are closed due to the COVID-19 infection. The benefit amounts to 60% of beneficiary’s average wage in the previous 12 months. The beneficiary’s employer has to certify the inability to work remotely and the school or municipality has to confirm the school closure or the unavailability of day-care services.

(f)an existing health-related expenditure on protective personal equipment and other medical supplies to ensure the health and safety of public sector employees, in particular, healthcare workers. 

(g)an existing measure consisting of premiums for medical practitioners and employees dealing with the Covid-19 crisis to reward them for their work in conditions of increased risk and workload. These premiums of 20% to 100% of monthly salaries exceed the maximum premiums allowed for public employees.

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

Health-related measures, as requested by Latvia, including on 6 October 2022, amount to EUR 70 921 236.

• 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.