(Apr. 24, 2020) On April 2, 2020, the European Commission (Commission) published a proposal for a regulation on the establishment of a temporary instrument for “support to mitigate unemployment risks in an emergency” (SURE) following the COVID-19 outbreak. The proposal, which has its legal basis in article 122 of the Treaty on the Functioning of the European Union (TFEU), aims to complement national efforts to avoid layoffs and preserve employment. (SURE art. 2.) Under SURE, the European Union (EU) would provide temporary financial support to member states by way of loans to mitigate public expenditure increases.
EU regulations have general application. They are binding in their entirety and directly applicable in the EU member states once adopted. (TFEU art. 288, para. 2.)
The COVID-19 outbreak has caused many businesses to reduce or suspend operations, affecting the working hours and income of their employees. The loans granted under SURE would be used either in the creation or extension of national “short-time work schemes,” or similar measures for the self-employed, to protect people against the risks of unemployment. Short-time work schemes are public programs that allow businesses to temporarily reduce employees’ working hours while maintaining the employer/employee relationship and provide income support to employees for the hours not worked. A majority of member states already have some version of short-time work in place. (SURE art. 1, para. 2; recitals 5 & 7.)
SURE would complement the European Union Solidarity Fund (EUSF), a permanent EU instrument that provides financial support in the form of grants to member states in case of emergencies whose scope was amended on March 30, 2020, to include public health emergencies. The proposed framework for SURE would build on the framework for the European Financial Stabilisation Mechanism (EFSM), which was adopted in 2010 to mitigate the impacts of the European financial and sovereign debt crises. Financial assistance under SURE would take the form of temporary loans. (SURE art. 4, recital 7 & Explanatory Memorandum at 3; Regulation (EU, Euratom) 2018/1046, art. 220.)
Conditions and Procedure for Obtaining SURE
A member state could request financial support from the Commission under SURE if there was a sudden and severe increase in its actual or planned public expenditure after February 1, 2020, as a result of its spending on national measures related to short-time work schemes. The Commission would ask the concerned member state to verify this increase by providing “appropriate evidence.” (SURE art. 3, para. 1; art. 6, para. 2.)
The Commission would submit a proposal to the Council asking it to make the loan available to the concerned member state. The decision of the Council would contain, among other things, the amount of the loan and its maximum average maturity, an assessment of eligibility conditions, and a description of the national short-time scheme(s). (Art. 6, paras. 1 & 3.)
The share of the three largest loans granted could not exceed 60% of the total amount of funding available. (Art. 9, para. 1.) The loans would be disbursed in installments. The Commission would set up the arrangements for the administration of the loans with the European Central Bank, and the concerned member state would manage the loan received in a special account in its national central bank. (Arts. 7 & 10.)
Funding and the Guarantee System
The Commission would be authorized to finance the loans by borrowing on behalf of the EU on the capital markets. (Art. 4; art. 8, para. 1.) The total funding available to all member states could not exceed €100 billion (approximately US$109.6 billion); this total amount would be supported by a guarantee system collectively committed to by all member states. (TFEU art. 122, para. 1; SURE arts. 5 & 11, para. 1, recital 1.)
Member states would commit to making “irrevocable, unconditional and on demand” contributions upon conclusion of an agreement. The guarantees would expand the total funding available and would ensure the compatibility of the EU’s contingent liability arising from SURE with the EU budget constraints. SURE would only become available when all member states had contributed. The total contribution by member states would need to represent at least 25% of the total funding and the individual contributions of member states would be proportional to their share of the total gross national income of the EU. (SURE arts. 11, para. 2; 12, para. 1; recitals 9–10.)
The legislative process is still ongoing in the Council of the European Union. If adopted, the Commission would review the continuation of the circumstances causing the economic disturbance every six months after SURE entered into force to decide whether the continuation of SURE was justified. (SURE art. 14.)
Prepared by Zeynep Timocin Cantekin, Law Library intern, under the supervision of Foreign Law Specialist Jenny Gesley.