Proposal for a COUNCIL IMPLEMENTING DECISION granting temporary support under Council Regulation (EU) 2020/672 to Croatia to mitigate unemployment risks in an emergency situation following the COVID-19 outbreak
Date: 2020-08-24
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: Croatia, EU loan, emergency aid, employment aid, epidemic, fight against unemployment, infectious disease, public expenditure, self-employed person

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   EUROPEAN COMMISSION  Brussels, 24.8.2020  COM(2020) 465 final 2020/0218 (NLE)  Proposal for a COUNCIL IMPLEMENTING DECISION granting temporary support under Council Regulation (EU) 2020/672 to Croatia to mitigate unemployment risks in an emergency situation following the COVID-19 outbreak  
 
 
EXPLANATORY MEMORANDUM 

1. 

• 

CONTEXT OF THE PROPOSAL 

Reasons for and objectives of the proposal 

Council  Regulation  2020/672  (“SURE  Regulation”)  lays  down  the  legal  framework  for 
providing  Union  financial  assistance  to  Member  States,  which  are  experiencing,  or  are 
seriously threatened with, a severe economic disturbance caused by the COVID-19 outbreak. 
Support  under  SURE  serves  for  the  financing,  primarily,  of  short-time  work  schemes  or 
similar measures aimed at protecting employees and the self‐ employed and thus reducing the 
incidence of unemployment and loss of income, as well as for the financing, as an ancillary, 
of some health-related measures, in particular in the workplace. 

On 6 August 2020, Croatia requested Union financial assistance under the SURE Regulation. 
In accordance with Article 6(2) of the SURE Regulation, the Commission has consulted the 
Croatian  authorities  to  verify  the  sudden  and  severe  increase  in  actual  and  planned 
expenditure  directly  related  to  a)  the  Job  preservation  subsidies  in  sectors  affected  by 
COVID–19 and b) the Aid for reduced working hours caused by the COVID-19 pandemic. In 
particular, it concerns:  

(1) 

(2) 

a  measure  that  provides  co-financing  of  workers’  salaries  to  businesses  that 
experience a drop in revenue (of 20% in the period March to May 2020 or 50% in 
June  2020),  on  condition  that  the  employment  relationship  is  not  terminated.  For 
March 2020, the amount of support is set at HRK 3,250.00 per full-time employee, 
and for the months of April, May and June 2020, the monthly amount of support is 
set at HRK 4,000 per full-time employee. 

a measure that provides support for the temporary reduction of working time in the 
period  between  June  and  December  2020  to  businesses  employing  10  or  more 
employees operating in any sector, on condition that the employment relationship is 
not terminated. Up to HRK 2,000 per month per employee can be supported by the 
measure. 

Croatia provided the Commission with the relevant information.  

Taking into account the available evidence, the Commission proposes to the Council to adopt 
an Implementing Decision to grant financial assistance to Croatia under the SURE Regulation 
to Croatia in support of the measures above. 

• 

Consistency with existing policy provisions in the policy area 

The present proposal is fully consistent with  Council Regulation 2020/672, under which the 
proposal is made. 

The present proposal comes in addition to another Union law instrument to provide support to 
Member States in case of emergencies, namely Council Regulation (EC) No 2012/2002 of 11 
November 2002 establishing the European Union Solidarity Fund (EUSF) (“Regulation (EC) 
No 2012/2002”). Regulation (EU) 2020/461 of the European Parliament and of the Council, 
which amends that instrument to  extend its scope to  cover major public  health emergencies 
and to define specific operations eligible for financing, was adopted on 30 March.   

• 

Consistency with other Union policies 

The proposal is part of a range of measures developed in response to the current COVID-19 
pandemic  such  as  the  “Coronavirus  Response  Investment  Initiative”,  and  it  complements 

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other  instruments  that  support  employment  such  as  the  European  Social  Fund  and  the 
European Fund for Strategic Investments (EFSI)/InvestEU. By making use of borrowing and 
lending in this particular case of the COVID-19 outbreak for supporting Member States, this 
proposal  acts  as  a  second  line  of  defence  to  finance  short-time  work  schemes  and  similar 
measures,  helping  protect  jobs  and  thus  employees  and  self-employed  against  the  risk  of 
unemployment.  

2. 

• 

LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY 

Legal basis 

The legal basis for this instrument is Council Regulation 2020/672.   

• 

Subsidiarity (for non-exclusive competence)  

The  proposal  follows  a  Member  State  request  and  shows  European  solidarity  by  providing 
Union financial assistance in the form of temporary loans to a Member State affected by the 
COVID-19  outbreak.  As  a  second  line  of  defence,  such  financial  assistance  supports  the 
government’s increased public expenditure on a temporary basis in respect of short-time work 
schemes  and  similar  measures  to  help  them  protect  jobs  and  thus  employees  and  self-
employed against the risk of unemployment and loss of income. 

Such  support  will  help  the  population  affected  and  helps  to  mitigate  the  direct  societal  and 
economic impact caused by the present COVID-19 crisis.  

• 

Proportionality 

The proposal respects the proportionality principle. It does not go beyond what is necessary to 
achieve the objectives sought by the instrument.  

3. 

• 

RESULTS 
CONSULTATIONS AND IMPACT ASSESSMENTS 

EX-POST 

EVALUATIONS, 

OF 

STAKEHOLDER 

Stakeholder consultations 

Due to the urgency to prepare the proposal so that it can be adopted in a timely manner by the 
Council, a stakeholder consultation could not be carried out. 

• 

Impact assessment 

Due to the urgent nature of the proposal, no impact assessment was carried out. 

4. 

BUDGETARY IMPLICATIONS 

The  Commission  should  be  able  to  contract  borrowings  on  the  financial  markets  with  the 
purpose  of  on-lending  them  to  the  Member  State  requesting  financial  assistance  under  the 
SURE instrument.  

In  addition  to  the  provision  of  Member  State  guarantees,  other  safeguards  are  built  into  the 
framework in order to ensure the financial solidity of the scheme: 

 

 

A rigorous and conservative approach to financial management; 

A  construction  of  the  portfolio  of  loans  that  limits  concentration  risk,  annual 
exposure and excessive exposure to individual Member States whilst ensuring 
sufficient resources could be granted to Member States most in need; and 

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 

Possibilities to roll over debt. 

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2020/0218 (NLE) 

Proposal for a 

COUNCIL IMPLEMENTING DECISION 

granting temporary support under Council Regulation (EU) 2020/672 to Croatia to 
mitigate unemployment risks in an emergency situation following the COVID-19 
outbreak 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty on the Functioning of the European Union,  

Having regard to Council Regulation (EU) 2020/672 of 19 May 2020 on the establishment of 
a  European  instrument  for  temporary  support  to  mitigate  unemployment  risks  in  an 
emergency (SURE) following the COVID-19 outbreak1, and in particular Article 6(1) thereof, 

Having regard to the proposal from the European Commission, 

Whereas: 

(1) 

(2) 

(3) 

On 6 August 2020, Croatia requested financial assistance from the Union with a view 
to complementing its national efforts to address the impact of the COVID-19 outbreak 
and its socio-economic consequences for workers.  

The  COVID-19  outbreak  and  the  extraordinary  measures  implemented  by  Croatia  to 
contain the outbreak and its socio-economic and health-related impact are expected to 
have  a  dramatic  impact  on  public  finances.  According  to  the  Commission’s  2020 
Spring forecast, Croatia was expected to have a general government deficit and debt of 
7.1%  and  88.6%  of  gross  domestic  product  (GDP)  respectively  by  the  end  of  2020. 
According  to  the  Commission’s  2020  Summer  interim  forecast,  Croatia’s  GDP  is 
projected to decrease by 10.8% in 2020.  

The COVID-19 outbreak has immobilised a substantial part of labour force in Croatia. 
This  has  led  to  a  sudden  and  severe  increase  in  public  expenditure  by  Croatia  in 
respect  of  job  preservation  subsidies  in  sectors  affected  by  COVID–19  and  aid  for 
reduced working hours, as set out in recitals 4 and 5.  

(4)  More specifically, the “Labour Market Act”2, as it is referred to in Croatia’s request of 
6 August 2020, introduced a measure that provides co-financing of workers’ salaries 
to businesses that experience a drop in revenue (of 20% in the period March to May 
2020  or  50%  in  June  2020),  on  condition  that  the  employment  relationship  is  not 
terminated. For March 2020, the amount of support  is  set  at  HRK 3,250.00 per full-
time employee, and for the months of April, May and June 2020, the monthly amount 
of support is set at HRK 4,000 per full-time employee. 

(5) 

The  Labour  Market  Act  also  introduced  a  measure  that  provides  support  for  the 
temporary reduction of working time in the period between June and December 2020 
to businesses employing 10 or more employees operating in any sector, on condition 

1 
2 

OJ L 159, 20.5.2020, p.1. 
OG 118/18, 32/20 

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(6) 

(7) 

(8) 

(9) 

that the employment relationship is not terminated. Up to HRK 2,000 per month per 
employee can be supported by the measure. 

Croatia fulfils the conditions for requesting financial assistance set out in Article 3 of 
Regulation  (EU)  2020/672.  Croatia  has  provided  the  Commission  with  appropriate 
evidence that the actual and planned public expenditure has increased by EUR 1 381 
780 800 as of 1 February 2020 due to the national measures taken to address the socio-
economic  effects  of  the  COVID-19  outbreak.  This  constitutes  a  sudden  and  severe 
increase because of the almost immediate and unprecedented increase in the number of 
workers covered by those measures and the magnitude of the related expenditures in 
Croatia.  Croatia  intends  to  finance  EUR  210  000  000  of  the  increased  amount  of 
expenditure through Union funds and EUR 151 180 800 through its own financing. 

The Commission has consulted Croatia and verified the sudden and severe increase in 
the actual and planned public expenditure directly related to short-time work schemes 
and similar measures referred to in the request of 6 August 2020, in accordance with 
Article 6 of Regulation (EU) 2020/672. 

Financial  assistance  should  therefore  be  provided  with  a  view  to  helping  Croatia  to 
address the socio-economic effects of the severe economic disturbance caused by the 
COVID-19 outbreak. 

This decision should be without prejudice to the outcome of any procedures relating to 
distortions of the operation of the internal market that may be undertaken, in particular 
under Articles 107  and  108 TFEU.  It  does not  override the  requirement  for Member 
States to notify instances of potential State aid to the Commission under Article 108 
TFEU. 

(10)  Croatia should inform the Commission on a regular basis of the implementation of the 
planned public expenditure, in order to enable the Commission to assess the extent to 
which Croatia has implemented that expenditure. 

(11)  The  decision  to  provide  financial  assistance  has  been  taken  taking  into  account 
existing  and  expected  needs  of  Croatia,  as  well  as  requests  for  financial  assistance 
pursuant  to  Regulation  (EU)  2020/672  already  submitted  or  planned  to be  submitted 
by other Member States, while applying the principles of equal  treatment,  solidarity, 
proportionality and transparency, 

HAS ADOPTED THIS DECISION:  

Croatia fulfils the conditions set out in Article 3 of Regulation (EU) 2020/672. 

Article 1 

Article 2 

1. 

2. 

3. 

The Union shall make available to Croatia a loan amounting to a maximum of EUR 1 
020 600 000. The loan shall have a maximum average maturity of 15 years.  

The availability period for financial assistance  granted by this Decision shall be 18 
months starting from the first day after the entry into force of this Decision.  

The Union financial assistance shall be made available by the Commission to Croatia 
in a maximum of eight instalments. An instalment may be disbursed in one or several 
tranches. The maturities of the tranches under the first instalment may be longer than 
the  maximum  average  maturity  referred  to  in  paragraph  1.  In  such  cases,  the 

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maturities  of  further  tranches  shall  be  set  so  that  the  maximum  average  maturity 
referred to in paragraph 1 is respected once all instalments have been disbursed.  

The  first  instalment  shall  be  released  subject  to  the  entry  into  force  of  the  loan 
agreement provided for in Article 8(2) of Regulation (EU) 2020/672.  

Croatia  shall  pay  the  cost  of  funding  of  the  Union  referred  to  in  Article  4  of 
Regulation (EU) 2020/672 for each instalment plus any fees, costs and expenses of 
the Union resulting from any funding.  

The Commission shall decide on the size and release of instalments, as well as on the 
size of the tranches.  

4. 

5. 

6. 

Croatia may finance the following measures: 

Article 3  

(a) 

(b) 

the job preservation subsidies in sectors affected by COVID–19, as provided for by 
the Labour Market Act, Articles 35 and 36; and 

the  aid  for  reduced  working  hours,  as  provided  for  by  the  Labour  Market  Act, 
Articles 35 and 36. 

Croatia  shall  inform  the  Commission  by  [DATE:  6  months  after  date  of  publication  of  this 
Decision],  and  every  6  months  thereafter  of  the  implementation  of  the  planned  public 
expenditure until such time as that planned public expenditure has been fully implemented. 

Article 4 

This Decision is addressed to the Republic of Croatia. 

Article 5 

This Decision shall be published in the Official Journal of the European Union.  

Done at Brussels, 

Article 6 

For the Council 
The President 

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