The European Union’s SURE plan to safeguard employment: a small step forward

The new EU instrument to mitigate unemployment risks during an emergency (SURE) is too modest to have a significant impact the COVID-19 crisis beyond being a first step in the overall recovery plan.

The European Union’s new instrument, the so-called temporary Support to mitigate Unemployment Risks in an Emergency (SURE), will provide temporary support of up to €100 billion in loans to EU countries that request financial assistance to fund job-saving initiatives. While the creation of the instrument has generated a lot of interest, its main benefit is to show that, if needed, the EU can create a borrowing capacity and issue a common safe asset. In terms of having a significant impact on the EU’s fiscal response to the COVID-19 crisis, however, SURE is too modest, and should be evaluated as only a part of a more complete recovery plan.

What is SURE?

The EU has been making back-to-back loans to its member states since the 1970s, but SURE has two original features. First, its stated objective is to ensure that countries can easily and cheaply finance the short-term work schemes heavily used since the beginning of the COVID-19 lockdowns. Second, to protect the EU’s AAA rating, the money raised by issuing bonds on international financial markets will be guaranteed by the so-called ‘headroom’ of the EU budget (ie the additional resources the Commission can call on from member countries to service its debt, principal and interest, if a debtor defaults), but also by an additional €25 billion in direct irrevocable callable guarantees from EU countries.

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