Tuesday, June 25, 2024

How to protect Europe’s jobs from coronavirus

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EU member countries have already called for temporary flexibility in the application of European fiscal rules, given the “unusual events outside the control of governments,” and the European Commission confirmed last week that Italy’s spending plans to combat the economic fallout of the coronavirus would not be taken into account when assessing Rome’s compliance with EU budget rules.

We urgently need to create a European Employment Protection Facility that will limit the extent to which layoffs take place as a result of the virus.

But this built-in flexibility of European rules is not enough. The EU has to address issues such as employment losses and access to finance and liquidity for SMEs affected by coronavirus. To be successful, any new measures must only finance temporary, real and specific needs related to the current crisis — rather than being yet one more excuse to ignore deficit rules.

As part of a successful response to the economic threat of coronavirus, we urgently need to create a European Employment Protection Facility that will limit the extent to which layoffs take place as a result of the virus.

Following the example of the European Financial Stabilisation Mechanism (EFSM), created in 2010 during the financial and debt crises, this would be a temporary body that implements employment protection programs similar to Germany’s Kurzarbeit program, which is also operational in countries including the Netherlands and Sweden.

Under the Kurzarbeit program, companies facing economic distress make a commitment to the government that they will not fire workers and will instead reduce the working hours of all employees. The government then covers a majority of the wages that each worker has had to forgo. The guiding principle is straightforward: Spread the job losses across workers, and prevent any of them from losing their jobs so as to protect families from economic distress.

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