On Wednesday, the European Commission (EC) released its first instalment of €17 billion as a part of the EU SURE instrument, which aims to protect jobs and prevent unemployment caused by the COVID-19 outbreak. This will consist of two bonds worth €10 billion and E€7 billion due for repayment in 2030 and 2040 respectively.
While making the announcement, Ursula von der Leyen said that the Commission was “sparing no efforts to safeguard livelihoods in Europe.” Further, she said that the worst-affected countries would receive expeditious assistance under the scheme. Through the EU SURE instrument, Member States will receive loans to help them finance “short-time work schemes and similar measures” to soften the blow of the pandemic on the job market. The funds can also be used to provide health benefits to employees to secure a “safe return to economic activity.”
Celebrating the announcement, the European Commissioner for Budget and Administration, Johannes Hahn, said, “With this operation, the European Commission has made a first step towards entering the major league in global debt capital markets […] The “social bond” character of the issuance has helped to attract investors who wish to help the EU Member States in supporting employment through these difficult times.”
Earlier this month, the EC announced a €100 billion bond for the EU SURE scheme. The plan was initially announced in April with an aim to “mitigate the severely negative socio-economic consequences of the coronavirus pandemic.” While describing the proposal, von der Leyen highlighted the importance of the scheme in preserving jobs and livelihoods. She saw the instrument as a “symbol of solidarity” and a clear testament to Europe’s commitment to protecting its citizens. In May, the European Council adopted the proposal.
According to the Treaty of Rome, which established the European Union in 1957, the EC has the power to borrow from international capital markets for the EU. Currently, the EU has four programmes for securing loans – The European Financial Stabilisation Mechanism, the Balance of Payments facility, the Macro-Financial Assistance and the Support to mitigate Unemployment Risk in an Emergency. The EU SURE scheme will provide additional relief by specifically targeting the issue of unemployment caused by the onset of the COVID-19 pandemic.
The new announcement comes amid the bloc being hit by the second wave of the COVID-19 pandemic. The European Centre for Disease Prevention and Control reported that a majority of countries in Europe were reporting more cases each day than they did during the first wave. Some countries are also seeing an alarming rise in the number of COVID-19-related deaths. For instance, in September, 159 deaths were reported in Spain. However, the number was at an alarming 547 in the first week of October alone. Even Germany, who was applauded for its successful handling during the first wave, are witnessing a significant increase in infections amidst their older citizens leading to a surge in patients needing to be admitted into intensive-care wards. Consequently, several countries are imposing various degrees on lockdowns, which is likely to increase the burden on the already crumbling economy of the bloc.