The European Commission is planning to present to EU finance ministers next week its pan-European unemployment reinsurance scheme proposal to support the countries most affected by the coronavirus.
The Commission and EU finance ministers are considering all options in their arsenal to cushion the economic impact of the coronavirus COVID-19. After years of debate, the European unemployment insurance scheme could see the light of day in the not-so-distant future.
The EU executive plans to present to the Eurogroup on 7 April a proposal to create a mechanism to top up national unemployment benefits, as EU sources confirmed to EURACTIV.
The Commissioner for the economy, Paolo Gentiloni, reported after last week’s Eurogroup that they were “working hard” to progress on this initiative, originally planned for the end of the year.
He warned that there were not too many resources to finance this reinsurance, as the EU is concluding its seven-year budgetary period (2014-2020). But Gentiloni added that solutions would be sought to finance the scheme.
The formula being considered is to mobilise resources using the EU budget as a guarantee, and even additional guarantees from the member states, according to the Financial Times newspaper. The goal would be to reach firepower of between €80 billion and €100 billion.
The money would be used to offer soft loans to countries hit by a sudden shock, such as the current pandemic.
Although this amount is significant and much higher than the nearly €13 billion planned for the budgetary instrument for the eurozone, it would represent less than 0.7% of the EU’s GDP.
A report drafted for the Commission by think tank CEPS last year expected that the size of this mechanism would be between 0.3% (lower bound) and 0.85% (upper bound) of EU/euro area GDP.
This initiative was part of the options discussed by the presidents of the Commission, the Eurogroup, the ECB and the European Council in a teleconference on Tuesday (31 March).
“To jump-start the European economy, we will have to use all levers available, at national and European level. The EU budget will have to be adapted to this crisis. It is time to think outside of the box. Any option compatible with the EU Treaty should be considered,” said European Council President Charles Michel.
A Commission spokesperson said that the four presidents had an exchange “on their respective activities with regards to the preparation of the economic recovery and possible contribution of their institution”.
The Commission expects that the crisis caused by the virus will be deeper than the Great Recession, and warned that temporary unemployment figures are “skyrocketing”, according to an internal document seen by EURACTIV.
The EU executive initially did not consider bringing this initiative forward, since it required more work to find a consensus formula. But the need to mobilise all available resources, and the opposition to more ambitious initiatives, such as the joint issuance of debt to finance the costs of the recovery, known as ‘coronabonds’, forced the. Commission to change its plans.
A pan-European unemployment insurance scheme has been considered for more than five years. German Finance Minister Olaf Scholz also proposed the option of providing soft loans to hard-hit countries, when he defended the European reinsurance scheme in 2018.
But other options have been more ambitious. Bruegel, an influential think tank, defended a European Catastrophic Unemployment Insurance Scheme (ECUIS), which would be financed also through borrowing, but would be reimbursed ex post not only by the beneficiary country, but with a single contribution rate on all wages across the bloc.
[Edited by Zoran Radosavljevic]