On 2 April 2020 the European commission proposed a new instrument for temporary Support to mitigate Unemployment Risks in an Emergency (“SURE”) regarding the the coronavirus pandemic consequences.
At a glance:
SURE will provide financial assistance:
- in the form of loans from the EU to Member States;
- granted on favourable terms;
- of up to €100 billion in total.
Aim: Assistance to the Member States to address sudden increases in public expenditure to preserve employment by covering the costs directly related to the creation or extension of national short-time work schemes, and other measures for the self-employed.
Regarding the short-time work schemes
By avoiding wasteful redundancies, short-time work schemes can prevent a temporary shock from having more severe and long-lasting negative consequences on the economy and the labour market in Member States. This helps to sustain families’ incomes and preserve the productive capacity and human capital of enterprises and the economy as a whole.
Amount of the funding
Up to €100 billion in total financial assistance will be available to all Member States. There are no pre-allocated envelopes for Member States.
How will the Commission secure and provide funding for the SURE instrument?
To finance the loans to Member States, the Commission will borrow on financial markets. The Commission would then provide the loans to Member States on favourable conditions. Member States would, therefore, benefit from the EU’s strong credit rating and low borrowing costs.
The loans will be underpinned by a system of voluntary guarantees from Member States committed to the EU. The instrument will start to function once all Member States have committed to those guarantees.
Defining the conditions of each loan
Following a request by a Member State for financial assistance, the Commission would consult the Member State concerned to verify the extent of the increase in public expenditure that is directly related to the creation or extension of short-time work schemes and similar measures for self-employed. This consultation will help the Commission to properly evaluate the terms of the loan, including the amount, the maximum average maturity, pricing, and the technical modalities for implementation.
On the basis of the consultation, the Commission would present a proposal for a decision to the Council to provide financial assistance. Once approved, the financial assistance will take the form of a loan from the European Union to the Member State requesting support.
How will the guarantee system work?
Loans provided to Member State under the SURE instrument would be underpinned by a system of voluntary guarantees from Member States. This will allow the Commission to expand the volume of loans that can be provided to Member States. To this end, a minimum amount of committed guarantees (i.e. 25% of the maximum amount of loans of €100 billion) is needed.
The Commission’s proposal for a SURE instrument will need to be swiftly approved by the Council. The new instrument will be of a temporary nature. Its duration and scope are limited to tackling the consequences of the coronavirus pandemic.