Rapidly developed to cushion the severe effects the pandemic was expected to have on businesses and workers, SURE has helped Member States to protect employment and keep EU economies afloat. With an evaluation of the scheme underway, there is an ongoing debate as to whether SURE should be here to stay as an ad hoc system of protection to help prevent job losses and provide income support during future serious crises
A financial tool launched by the European Commission in the early days of COVID-19 as a support for Member States to mitigate unemployment risks in an emergency, SURE has so far helped between 25 and 30 million Europeans, including five million self-employed, and its impact on preserving jobs has been remarkable, an EESC hearing has found.
Put in place as an emergency instrument justified by exceptional occurrences under Article 122 of the TFEU and with a sunset clause foreseeing its end on 31 December 2022, SURE came with an envelope capped at EUR 100 billion. Since October 2020, close to EUR 90 billion has been disbursed to 19 countries requesting SURE loans, with a favourable response from financial markets and a level of interest 10 times higher than expected.
Based on a system of loans and back-to-back loans conditional on developing short-time work schemes and similar measures aimed at preserving jobs and income, SURE gives full ownership to Member States in running such schemes to provide all types of benefits.
By supporting these measures, SURE has contributed to limiting the rise in unemployment in the EU, keeping jobs alive and companies operational, and preserving skills, the EESC hearing revealed.
The hearing was organised to gather input from researchers, stakeholders and civil society organisations for the upcoming EESC opinion on Emergency measures to support employment and income during the pandemic crisis. The conclusions of the opinion will feed into the evaluation of SURE, to be carried out by the Commission.
The hearing also looked at the prospects for keeping or further developing such an instrument in the future to ward off job losses during future emergencies.
Opening the hearing, the rapporteur for the EESC opinion Cinzia Del Rio said:
The health crisis was rapid and unexpected and greatly affected the economic situation, also having a huge social impact. SURE is an instrument which has supported and covered extraordinary costs incurred by Member States in such extraordinary times. It has proven to be an important tool for promoting social stability.
The Commission launched SURE shortly after the first lockdowns in March 2020, with its legislative proposals adopted by the Council and made operational six months later. The instrument was supported by all Member States, including those not benefiting from it, who all voluntarily provided guarantees.
One of the key lessons to learn is that SURE has shown that the Union is capable of acting very quickly and in a timely manner in a spirit of solidarity, said Gilles Mourre, head of unit in the Commission's DG ECFIN, who, together with Isabel Junto, presented the Commission's work in this area.
SURE has also turned out to be very popular among the EU Member States and financial markets and has been very efficient, with impressive delivery. It was definitely the right answer to this crisis, with the EU acting as a second line of defence to help Member States help their citizens, Mr Mourre said.
Member States were allowed to ask for a top-up and the second wave of requests was processed in only two months in the first half of 2021. Around EUR 6 billion is still left to be used as an insurance against economic hiccups in the near future, Mr Mourre maintained.
In his view, the possible reasons for such a huge interest in SURE include the EU's high level of financial credibility passed on to Member States via back-to-back loans, and the fact that the EU debt issuance had a clear social goal and a strong economic rationale.
Contrary to some fears that taking such a loan would stigmatise countries on financial markets as being weak, this did not happen as targeted conditionality and strong ownership by Member States of the schemes proposed with the help of SURE, coupled with the massive increase in spending, limited the stigma effect.
All participants in the hearing gave a favourable assessment of SURE's contribution in helping countries develop measures preventing significant job losses.
Most notable is that the increase in unemployment was nowhere near as significant as might have been expected given the decline in GDP, said Tina Weber, researcher at Eurofound, adding that despite the absence of an evaluation of the emergency measures to date, it was safe to say that their broad range helped limit the impact of the crisis on employment and incomes.
When compared to the US, which did not implement short-time work schemes or similar measures, the EU has fared significantly better. The US had a much higher increase in unemployment and a greater decline in employment in the second and third quarters of 2020.
OECD simulations estimate that short-term work subsidies reduce the share of jobs at risk by 10 percentage points from 22%. A Eurofound survey shows that individuals benefiting from such schemes are less likely to experience financial hardship and expressed greater trust in their governments, Ms Weber said.
However, working hours declined by around 14% in the second quarter of 2020 and by around 5% in the fourth, compared to the same period of the previous year, with young people slightly more likely to be employed but not working. In the second quarter of 2020, there was more of an outflow of employment into inactivity than into unemployment. Of all the measures, telework protected employment the most.
Concern over a lack of protection for temporary workers, mainly young people and women, remains high as despite an increase in their coverage in the short-time work measures, they accounted for some 75% of the headcount reduction during the crisis. One significant innovation was income support for the self-employed, with many such support schemes introduced but access remaining limited due to strict eligibility criteria, including regarding the reduction in income, which had to be around the minimum wage rate.
Training is another concern, and there is a clear need for investment in more training as it has remained unavailable for many workers during the crisis. The measures to support short-time work schemes should be linked to active labour market policies, such as the promotion of re-skilling and up-skilling.
Overall in the EU, 35% of measures were aimed at supporting businesses to stay afloat, 20% sought to protect incomes and 13% focused on the protection of employment. However, the implementation of short-time work schemes significantly differs between EU countries. They can be found in all countries, but with very different provisions in terms of eligibility, replacement rates offered, duration and funding arrangements.
By way of example, more than 1.5 million workers in Spain had access to benefits that were partly funded by the SURE programme, with job retention schemes significantly helping recovery, said Raymond Torres, member of the Spanish Economic and Social Committee.
This scheme was designed so as to maintain incentives to work, which saw many people in job retention schemes going back to work when circumstances allowed. However, a major group not adequately covered were temporary workers in precarious employment.
Discussing future prospects for having an employment support mechanism for future crises, the preferred option would be to make SURE a permanent instrument together with a European Unemployment Reinsurance Scheme (EURS) as an automatic fiscal stabiliser, said Francesco Corti, researcher at the Centre for European Policy Studies (CEPS).
An EURS is a supranational institutional automatic stabilisation mechanism, providing temporary fiscal transfers to Member State facing a sudden rise in their unemployment rate.
SURE expires next year and we will not have an instrument to protect employment in the event of an economic downturn, Mr Corti stressed, adding that in order to make SURE a permanent tool, the current governance should be kept and the legal basis changed.
With SURE, the risk of moral hazard is very limited as it is based on loans and not grants, and the maturity is so long that it makes the risk of non-repayment very low. The role of social partners is not affected as SURE does not intervene in national employment schemes.
However, its major limitation is its temporary duration and the fact that it is at the discretion of the Commission to financially support Member States with no clear criteria for distribution or the characteristics of the bonds to be issued. These and other pitfalls of the instrument, partly due to the fact that it had to be set up very rapidly, could be easily fixed in the future, Mr Corti stressed.
Ignacio Doreste, advisor at ETUC, agreed with Mr Corti and said that by building on the positive experience of SURE, the EU should put forward European automatic stabilisers, such as EURS, to support countries experiencing asymmetric shocks.
Europe should avoid repeating the mistakes of the past and returning to the narrative of fiscal consolidation, together with harsh austerity measures and a deregulatory agenda, which would weaken the economic recovery, Mr Doreste said, adding that ETUC believed that the Stability and Growth Pact should be revised in order to revamp the narrative of austerity. Social, economic and environmental aspects should be put on an equal footing.
Describing SURE as a very timely instrument, well suited to the challenging circumstances and targeting the needs of enterprises, Maxime Cerutti of Business Europe described its impact on preserving jobs as
Member States are clearly in control and SURE is an additional resource, Mr Cerutti said, placing an emphasis on attracting inactive people into employment.
Employment growth is the only way we will be able to maintain social protection and benefits, he said, also pointing to reskilling as an important factor for job-to-job transition and to the role of private employment services in encouraging employment creation and participation.
Concluding the event, Ms Del Rio said:
SURE has proven to be a proper safety net, a system providing some security to Member States and some social stability for the Eurozone. It will benefit the Eurozone in times of recovery and provide more cohesion.
However, accurate data on the sectors that have benefited from SURE is still lacking and the precise assessment of the impact it has had on the 19 countries using it is still pending, she said. This information will be key to further assessing the possibility of making SURE a permanent stabiliser mechanism. The upcoming EESC opinion will also be of further help in carrying out this important political assessment.