The SURE programme has not even been announced yet and I already see fake news circulating on the web. On the basis of the Commission’s proposal published yesterday, I’ll try to answer some questions/doubts.
Let me add a personal comment, placing myself between those who believe it is an historic decision and those who think it is a hoax or worse. I believe it is a very important tool to face one of the key challenges the crisis poses: financing social welfare measures to support employment.
Not a minor result, considering that we have spoken for years about a similar instrument without ever reaching a concrete proposal or agreement. But we are not before the magic solution that will solve everything, it is important to be aware of that. There are many other problems related to the crisis that will need to be tackled and for which we will need to think about other mechanisms. So I believe the wisest approach would be to be satisfied with the result without wasting any time and continue the fight towards the next objectives. Below are 4 Q&As to better understand what SURE is.
1. What is SURE?
It is a proposal presented by the European Commission to create a “Support mitigating Unemployment Risks in Emergency”, an instrument aimed at temporarily support national systems that engage in short-term employment programmes or similar measures to protect against the risk of unemployment in response to the economic crisis caused by the COVID-19 pandemic.
It is funded with the issuing of bonds on the market for a value of up to 100 billion euros and is supported by a guarantee made available by the Member States equivalent to 25% of the issued bonds.
The money raised can be used as loans to States in more difficulty to cover the measures in support of employment (i.e. furlough schemes).
2. Why loans and bonds instead of the EU resources like the structural funds?
First of all, the EU does not currently have that amount of resources (100 billion) in its budget for assistance aid, nor can it raise them through tax measures as the Union does not have its own fiscal capacity (the EU cannot levy taxes on EU citizens or companies).
It is worth remembering that all the extraordinary intervention and assistance instruments put in place in the EU to date revolve around this mechanism: loans financed through bonds issued by participating States (i.e. the European Stability Mechanism). The point is not the mechanism per se but the conditions of such loans (timings, repayment method, interest rate, guarantees, etc.).
3. If they are loans, where is the solidarity? And why would they be convenient?
The solidarity is based on the fact that the countries that have high levels of debt and less solid ratings on the markets (like Italy) can obtain loans at a lower price and guaranteed by other European countries that are ready to “pay for it” should the partner country be unable to honour its commitments. This is the convenience: advantageous conditions for high-debt countries to obtain resources. Clearly the convenience is just for these countries, as low-debt countries can already finance themselves at low rates, but which should join the effort with solidarity and in favour of EU stability and solidity.
4. Is it true that Italy should immediately play 25 billion as a guarantee?
This is FALSE. Actually, this question contains two false statements.
The first concerns the false belief that the entire guarantee of the fund should be covered by one Country. On the contrary, the guarantee must be shared among the participating States. If the Fund raises 100 billion, and needs 25 billion as guarantee, this amount will be divided among the participating States (10, 15 or all 27 EU Members) based on their gross national income.
The second false statement is that the guarantee must be provided immediately. The SURE guarantee works similarly to how loans with a guarantor work: the latter does not pay anything when the loan is signed, but commits to do that in case the debtor stops paying. The same will happen with SURE: Italy will intervene only in the (hopefully unlikely) case that other countries will not be able to repay their loan. And will only pay its share.