SURE: An EU programme for support to mitigate unemployment risks in an emergency

During the last weeks, the European Commission has been proposing a number of innovative mechanisms to help fight off the Coronavirus crisis in Europe and the Member States. Indeed, extraordinary times require extraordinary measures. One of the ambitious initiatives announced lately was the so-called SURE programme, the Support to mitigate Unemployment Risks in an Emergency.   Announced on April 2nd SURE -a solidarity instrument to finance increases in national public expenditure to preserve employment, most notably via short-time work in affected sectors and companies-  would represent a total of €100 billion would be made available by the EU to the Member States in the form of favourable loans.

While the SURE programme is planned to be tied to labour market impacts of the Corona crisis and is scheduled to be of temporary nature, its objective and rationale is in fact similar to a permanent European Unemployment Reinsurance Scheme which the European Commission has already been working on prior to the current crisis and which will likely remain on the table thereafter as well.   

In its proposal, the European Commission suggests that the EU provide loans backed by joint Member State guarantees to the individual Member States. These Member States would then benefit from the EU’s strong credit rating and low borrowing costs.  

The Member States would need to request financial aid to the European Commission, which would then consult with the Member State in question to verify the extent of public expenditure. This would help the European Commission evaluate the terms of the loan. 

The European Commission would then present a proposal to the Council. Once approved it would be regarded as a loan from the EU to that particular Member State. This mechanism would only be put into practice once all Member States have a functioning system of guarantees.  

While SURE would be designed to enable the Member States to further increase public expenditure to protect jobs, it would also help small businesses and SMEs without new projects and work (and hence no revenue) survive the crisis, helping them to overcome the first impact of an economic shock by alleviating financial liquidity difficulties.   

The most common example under the SURE programme would be companies ordering their staff to work in short-time schemes, hence reducing working hours and company pay, with the state  stepping in to cover the rest of the salary of the hours not worked – or at least a significant share of the rest.  

This would prevent affected companies from declaring bankruptcy due to lacking liquidity while maintaining its staff. The workers, on their side, would continue to receive wages and avoid facing unemployment or personal financial issues in the household.  

The promotion of short-time work schemes, is inspired by the experiences made in Germany with the so-called Kurzarbeit’; a tool which seems potentially appropriate to respond o the economic impact of the Corona-crisis.  

German trade unions have been largely supportive of such schemes in the past and now: According to Ulrich Silberbach, President of the German Civil Service Federation dbb,  “State-sponsored short-time work has brought Germany through the [last] global financial crisis without major job losses. It is therefore also now, in the Corona crisis, an important instrument to secure employment and to support companies that would, despite being competitive, disappear from the market. Short-time work makes an important contribution to the social security and the income of employees and thus contributes significantly to the maintenance of economic demand overall.”

The Eurogroup, composed of the finance ministers of the Eurozone, backed the idea of the scheme in principle at its meeting on April 9On April 16, the Eurogroup expressed its commitment to SURE and to proceed the negotiations with the Commission. The initiative currently awaits approval by the Council, who still has to decide on the details of the scope, execution and control of the scheme.