SURE or the EU to aid European workers

The current health and economic crisis is the most significant since the Second World War. Just as ten years ago with the eurozone crisis, this crisis has put solidarity between European Union (EU) countries to the test. But this time, European decision-makers have been more equal to the challenge. Since last April, they have adopted a series of initiatives to support Member States’ response to the pandemic and mitigate the duration and scale of this crisis. In April, EU finance ministers adopted a €540 billion emergency rescue package to help Member States cope with the economic and social consequences of COVID-19. This package was supplemented in July by a €750 billion recovery plan called ‘Next Generation EU’.

Among the various instruments adopted, one is explicitly aimed at protecting jobs and workers affected by the Covid-19 pandemic. During the 2008 economic crisis, short-time working schemes proved effective in many Member States, particularly in Germany, in limiting the impact of the recession on employment. In light of this, the Commission has proposed a new budgetary instrument called SURE (which stands for ‘Temporary Support to mitigate Unemployment Risks in Emergency situations’), which aims to support Member States’ short-time working schemes.

SURE: from ambition to action

With a total strike force of €100 billion, SURE provides financial assistance in the form of loans granted on favourable terms (lower interest rates and/or longer maturities) by the EU to Member States to finance short-time working schemes and similar measures to protect jobs and, thus, employees and the self-employed against the risk of unemployment and loss of income.

In the context in which it was adopted, SURE offers two major advantages. First and foremost, this programme should be seen as proof of European solidarity, particularly for the countries hardest hit and their citizens. In a context of growing Euroscepticism in some countries, particularly Italy, where citizens have felt abandoned by other European countries, this political aspect should not be underestimated.

Economically, the introduction of SURE has encouraged Member States to set up and make use of short-time working schemes. These schemes strengthen the resilience of economies by avoiding the breakdown of employment relationships, which are very costly for workers and businesses. Thanks to short-time working, redundancies and future recruitment costs are reduced, the production capacity and human capital of businesses are preserved, and the loss of household income is limited. These schemes have been used extensively by Member States since March 2020 and have played a major role in ensuring the survival of European businesses and preventing a sharp and rapid rise in unemployment.

Last August, the Commission proposed granting €87.3 billion to 16 Member States that had made a formal request for financial support under the SURE instrument. According to this proposal, Italy and Spain will be the two main beneficiaries of this initiative, with €27.4 billion and €21.3 billion respectively. Germany and France have not, at this stage, made use of this instrument.

The limitations of the SURE mechanism

Although a welcome initiative, SURE also has its limitations. The main criticism levelled at SURE is that it is a loan instrument rather than a grant instrument. The instrument will therefore do little to reduce the risk of unsustainable debt in certain EU countries that are already heavily indebted, such as Italy and Spain. This criticism, which was made when SURE was adopted, must now be qualified, as the €750 billion recovery plan adopted last July includes €390 billion in grants to finance the recovery, particularly in the countries most affected by the crisis.

A second limitation of SURE is that this instrument only provides financial support and does not address any shortcomings in national short-time working schemes. Given the urgency of the situation, it was neither desirable nor feasible to impose conditionality on the granting of SURE funding. However, it would be useful to share national best practices and have Commission recommendations for effective short-time work schemes. These recommendations could, for example, stipulate that: (i) all workers must be included, including the self-employed; (ii) companies that distribute dividends or have subsidiaries in tax havens should not be eligible for public support; iii) use of the scheme should be conditional on companies retaining their workers, even beyond the duration of the support granted; iv) workers’ downtime should be used to enhance their skills, in particular through training, including online training.

SURE: a catalyst for European unemployment reinsurance?

Finally, although short-time working schemes help to limit the rise in unemployment and, at the same time, the scale of the social and employment crisis, the current crisis will inevitably have a medium-term impact on the labour market. Some workers have already been made redundant and others will follow. To respond to this situation, SURE, which is a temporary instrument, must be complemented by other initiatives. Beyond the recovery plan already adopted and the various initiatives it includes to support employment, SURE should be the embryo of a permanent European unemployment reinsurance instrument. The idea of unemployment reinsurance is not new; it has been advocated by many experts since the eurozone crisis as an indispensable instrument to complement the architecture of Economic and Monetary Union. SURE could help to overcome resistance to such a move, and this would certainly be its most visible and important legacy. Before the crisis, the Commission chaired by Ursula von der Leyen had announced a proposal to create a European unemployment reinsurance scheme by the end of 2020. Against a backdrop of rising unemployment in the EU, it is important that this ambition is maintained.

Financial assistance is, of course, not the only lever available to the EU to resolve the social and employment crisis. We can welcome the adoption last July of a European initiative to promote youth employment, ‘A Bridge to Employment’, and the new European skills strategy. With the acceleration of the digital and ecological transitions expected from national recovery plans, it is essential to invest in the reskilling and upskilling of workers. In addition, the von der Leyen Commission has committed to adopting an action plan in 2021 to implement the 20 principles of the European Pillar of Social Rights (adopted in 2017). The adoption of this plan is all the more necessary in the current pressing social context.