Brussels proposes £88.5bn EU-wide unemployment scheme as coronavirus job losses skyrocket
The package would help fund loans to governments that needed support financing short-time work schemes so firms can send workers home or radically reduce their hours during the COVID-19 downturn. Under the scheme, employees would see their lost income covered by the state until they are able to go back to work. The European Commission’s plans are likely to be modelled on Germany’s Kurzarbeit programme, which promises workers 60 percent of their pre-crisis pay.
Another similar model was recently unveiled by Chancellor Rishi Sunak, as part of the UK’s response to the global pandemic, under which the Treasury will cover 80 percent of the salary of retained workers, up to a total of £2,500 a month, to prevent them from being laid off by their employers.
With unemployment expected to soar across the bloc, the Commission is planning to borrow between £70 billion and £88 billion to funds its new initiative.
An internal document warned “temporary unemployment figures are skyrocketing” as the coronavirus continues to wreak havoc across the bloc.
“Given the sudden and significant impact of the shock on employment, income support measures for laid off workers becomes urgent,” it added.
The EU would have to borrow to create its own specialised unemployment loans for the governments that requested support.
Brussels’ own borrowing would be guaranteed against unallocated funds in the bloc’s budget but also by European capitals.
It is unclear whether the UK Government will be able to benefit from the scheme during the post-Brexit transition period.
A mechanism would be included to limit the support made available to any one country.
Eurocrats have long wanted to create an unemployment reinsurance scheme but have been forced to accelerate their work because of the growing economic chaos brought by the coronavirus.
The plan comes as part of the Commission’s desperate attempt to broker a compromise in the row over a joint-eurozone debt mechanism to prop up ailing economies, like Italy, which has been opposed by both Germany and the Netherlands.
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European leaders couldn’t reach an agreement on the so-called “coronabonds” during a teleconference summit last week, and instead pushed the concept back to eurozone finance ministers.
The Commission’s new unemployment plans look set to feature in the latest discussions by the Eurogroup on Tuesday next week.
Ministers could also discuss further plans to bolster the European Investment Bank’s role in fighting the economic fallout of the coronavirus crisis.
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The Commission also wants the bloc’s next seven-year budget to be tweaked to play a major role in the post-COVID-19 economic recovery.
Officials have already begun work on redrawing Commission President Ursula von der Leyen’s original budget proposal that was rejected by EU leaders last month.
Their meeting is quick emerging as a crunch moment for the EU’s future as the bloc attempts to conjure up a common response to the global pandemic.
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