European governments have been subsidising wages and keeping workers on the payroll during the coronavirus pandemic through short-time work and furlough schemes. These financial aids are helping to cushion the blow to workers in industries struggling due to the pandemic. To further this aid, the EU has created an initiative called SURE (Support to mitigate Unemployment Risks in an Emergency).
What is SURE?
The European Commission’s ﬂagship initiative, SURE, acts as a second line of defence and supports the furlough and short-time work schemes. It complements national employment schemes and has already provided emergency financial assistance, totaling 90.3 billion euros, in loans to 18 EU countries. 39.5 billion of this has already gone to Italy, Spain, Poland, Greece, Croatia, Lithuania, Cyprus, Slovenia, Malta, Latvia, Belgium, Romania, Hungary, Portugal and Slovakia. The goal of SURE is to help member states with the sudden increases in public expenditure linked to the preservation of jobs.
How it works
The Commission is borrowing billions of euros on capital markets by issuing bonds) with low-interest rates that benefit from the EU’s solid credit rating. It then lends the proceeds to member states under the same conditions the money was borrowed. The loans can only be used for short-time work schemes or similar measures for the self-employed.
What are short-time work schemes and why are they important?
Short-time work schemes and furlough schemes allow people to stay in employment during the pandemic. This in turn limits financial losses to household incomes and lowers firm wage costs. These schemes also support the larger economy and mean that employees are ready and available when activity returns to normal.
The SURE bonds are ‘social bonds’ meaning the funds serve a truly social objective. All the bonds issued in 2020 are due for repayment anywhere between 2025 and 2051. Real Economy, reporter, Fanny Gauret talked to a new small business in Lithuania that has already received help via the SURE scheme. A flower shop run by sisters, Kristina and Dovile Ambrazeviciute, has remained operational due to the aid. 90% of their employee’s salary was covered by it. The sisters also received money for their rent. The shop is now closed again due to coronavirus restrictions, but they have moved online. Lithuania now plans to spend close to 900 million euros in 2021 to finance benefits and wage subsidies.