Unprecedented challenges in 2020 cleared the way to unprecedented instruments in the EU

Employment and Social Affairs

Covid-19 pandemic undoubtedly characterized this 2020, together with many challenges and opportunities for the EU such as the new Multiannual Financial framework 2021-2027, Brexit coming into force and the whole reform process related to Union’s project credibility.

The year 2020 began for the EU with Croatian presidency of the Council, the first time for the “youngest member”, just some weeks before being upset by the unprecedent symmetrical challenge of the pandemic. In the second semester, then, Germany took over the presidency in a crucial period for economic recovery, namely for the adoption of MFF 2021-2027 and Next Generation Eu, but even for the common fight to find a vaccine and for Brexit deadline at the end of the year.

For several aspects it could be said that 2020 has tested EU resilience, and no other country more than Germany could have guided Europe during these crucial times where mediation and compromise were decisive elements. At the end of the day, it could be said that the EU has proved its effectiveness, overcoming Poland and Hungary’s veto on MFF and Next generation EU, while entering in 2021 with a new cohesion although many challenges still lies ahead.

Even as regard employment and social related issues, 2020 has been an extremely difficult year. As highlighted by EU’s Autumn economic forecast, job losses and the rise in unemployment have put severe strains on the livelihoods of many Europeans. Policy measures taken by Member States, together with initiatives at EU level have helped to cushion the impact of the pandemic on labour markets. The unprecedented scope of measures taken, particularly through short-time work schemes, have allowed the rise in the unemployment rate to remain muted compared to the drop-in economic activity. Unemployment is set to continue rising in 2021 as Member States phase out emergency support measures and new people enter the labour market but should improve in 2022 as the economy continues to recover. The forecast projects the unemployment rate in the euro area to rise from 7.5% in 2019 to 8.3% in 2020 and 9.4% in 2021, before declining to 8.9% in 2022. The unemployment rate in the EU is forecast to rise from 6.7% in 2019 to 7.7% in 2020 and 8.6% in 2021, before declining to 8.0% in 2022.

But together with this unprecedented challenge, many actions have been put in place by the EU, and not just as regards emergency measures such as Next Generation Eu. “Alongside the difficulties brought by the pandemic, we have also made some real progress in EU social policy. And this is just the beginning. Next year we will dedicate ourselves to turning the Pillar of Social Rights into concrete action”, said Nicolas Schmit, Commissioner for Jobs and Social Rights.

In 2020 the EU Commission proposed a directive to ensure that the workers in the Union are protected by adequate minimum wages allowing for a decent living wherever they work. When set at adequate levels, minimum wages do not only have a positive social impact but also bring wider economic benefits as they reduce wage inequality, help sustain domestic demand and strengthen incentives to work. The current crisis has particularly hit sectors with a higher share of low-wage workers such as cleaning, retail, health and long-term care and residential care. Ensuring a decent living for workers and reducing in-work poverty is not only important during the crisis but also essential for a sustainable and inclusive economic recovery.

Another crucial programme launched by the EU during the pandemic is SURE, a new temporary instrument of up to 100 billion euro designed to urgently provide financial assistance in the form of loans to Member States experiencing a severe increase in public expenditure for the preservation of employment. The financial assistance complements national measures and will be channelled by the EU to beneficiary Member States in the form of loans granted on favourable terms. As the EU enjoys AAA credit rating with stable outlook, it is setting up a programme aimed at providing financial assistance to Member States. This instrument is funded through bonds issued on the capital markets. To this end, the European Commission is empowered to contract borrowings on the capital markets on behalf of the EU.

The Commission aims at issuing the bonds under the SURE instrument as social bonds. The SURE instrument will support national short-time work schemes and similar measures, to help Member States protect jobs and thus employees and the self-employed against the risk of unemployment and loss of income. It will help sustain families’ incomes and preserve the productive capacity and human capital of enterprises and the economy. In this way, it will help mitigate the direct societal and economic impact caused by the COVID-19 pandemic.

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