Proposal for a COUNCIL IMPLEMENTING DECISION granting temporary support under Council Regulation (EU) 2020/672 to Cyprus 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: Cyprus, 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) 454 final 2020/0224 (NLE)  Proposal for a COUNCIL IMPLEMENTING DECISION granting temporary support under Council Regulation (EU) 2020/672 to Cyprus 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, Cyprus requested Union financial assistance under the SURE Regulation. 
In accordance with Article 6(2) of the SURE Regulation, the Commission has consulted the 
Cypriot authorities to verify the sudden and severe increase in actual and planned expenditure 
directly related to: a) the special leave scheme for parents, b) the sickness benefit scheme for 
employees of the private sector and self-employed, c) the scheme supporting companies  for 
the  total  suspension  of  their  operations,  d)  the  scheme  supporting  companies  for  the  partial 
suspension  of  their  operations,  e)  the  special  scheme  for  the  self-employed,  f)  the  special 
scheme  for  hotel  units  and  tourist  accommodation,  g)  the  special  scheme  to  support 
businesses related to the tourism industry or affected by tourism or associated with businesses 
subject  to  mandatory  total  suspension,  h)  the  special  scheme  for  supporting  businesses 
exercising  predefined  activities,  and  i)  the  subsidisation  scheme  of  very  small  and  small 
enterprises  and  self-employed  caused  by  the  COVID-19  pandemic.  In  particular  these 
measures concern:  

(1) 

(2) 

(3) 

(4) 

(5) 

the special leave scheme, which provides wage compensation to parents working in 
the private sector who have children up to the age of 15 or children with disabilities 
of any age; 

the scheme supporting companies for total suspension of operations, which provides 
wage  compensation  to  90%  of  the  employees  of  the  businesses  forced  to  suspend 
their  operations,  conditional  on  employment  retention.  The  compensation  covers 
60% of the employee's salary or 60% of the employee's social insurance units earned 
in  2018  (2019  for  the  period  7/2020-8/2020),  whichever  is  the  greater.  The 
compensation  ranges  between  a  maximum  of  EUR  1  214  and  a  minimum  of  EUR 
360 per month;  

the  scheme  supporting  companies  for  partial  suspension  of  operations,  which 
provides wage compensation to the employees of businesses experiencing at least a 
25% decline in turnover due to the pandemic, conditional on employment retention. 
The  compensation  covers  60%  of  the  employee's  salary  or  60%  of  the  employee's 
social  insurance  units  earned  in  2018,  whichever  is  the  greater.  The  compensation 
ranges between a maximum of EUR 1 214 and a minimum of EUR 360 per month;  

the  ‘special  scheme  for  self-employed’,  which  provides  compensation  to  self- 
employed  persons  who  cannot  exercise  any  activity  according  to  the  decree  of  the 
Minister of Health and/or a decision of the Council of Ministers; 

the ‘special scheme for hotel units and tourist accommodation’, which provides wage 
compensation  to  support  employees  in  the  hotel  industry  and  other  businesses 
providing  tourist  accommodation  whose  employer  has  fully  suspended  their 

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(6) 

(7) 

(8) 

(9) 

operations  or  experienced  a  decline  in  turnover  of  more  than  40%.  Participation  in 
the scheme is conditional on employment retention; 

the ‘special scheme to support businesses related to the tourism industry or affected 
by  tourism  or  associated  with  businesses  that  are  subject  to  mandatory  total 
suspension’,  which  provides  wage  compensation  to  the  employees  in  those 
businesses  that  have  fully  suspended  their  operations  or  experienced  a  decline  in 
turnover of more than 55%, conditional on employment retention; 

the  ‘special  scheme  for  supporting  businesses  exercising  special  predefined 
activities’,  which  provides  wage  compensation  to  the  employees  of  the  businesses 
facing  a  decline  of  at  least  55%  of  their  turnover,  conditional  on  employment 
retention; 

the subsidisation scheme for very small and small enterprises and self-employed who 
employ up to 50 employees, which provides a lump sum grant to support operating 
expenses of small businesses and the self-employed;  

the  ‘sickness  benefit  scheme’,  which  provides  wage  compensation  to  employees  of 
the private sector and self-employed, on the condition that they are either classified 
as  vulnerable  individuals  according  to  a  list  published  by  the  Ministry  of  Health, 
placed in quarantine by the Authorities, or infected by Covid-19. 

Cyprus 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 Cyprus under the SURE Regulation 
in support of the above measures. 

• 

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 
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.   

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• 

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 

 

Possibilities to roll over debt. 

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2020/0224 (NLE) 

Proposal for a 

COUNCIL IMPLEMENTING DECISION 

granting temporary support under Council Regulation (EU) 2020/672 to Cyprus 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 outbreak 1, and in particular Article 6(1) thereof, 

Having regard to the proposal from the European Commission, 

Whereas: 

(1) 

(2) 

(3) 

On 6 August 2020, Cyprus 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  Cyprus  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, Cyprus was expected to have a general government deficit and debt of 
7%  and  115.7%  of  gross  domestic  product  (GDP)  respectively  by  the  end  of  2020. 
According  to  the  Commission’s  2020  Summer  interim  forecast,  Cyprus’  GDP  is 
projected to decrease by 7.7% in 2020.  

The  COVID-19  outbreak  has  immobilised  a  substantial  part  of  the  labour  force  in 
Cyprus. This has led to a sudden and severe increase in public expenditure by Cyprus 
in respect of the special leave scheme for parents, the schemes supporting companies 
respectively for the partial and total suspension of their operations, the special scheme 
for the self-employed, the special scheme for hotel units and tourist accommodation, 
the special scheme to support businesses related to the tourism industry or affected by 
tourism  or  associated  with  businesses  subject  to  mandatory  total  suspension,  the 
special scheme for supporting businesses exercising special predefined activities, and 
the subsidisation scheme of very small and small enterprises and self-employed, and in 
support of public health measures, regarding the sickness benefit scheme as set out in 
recitals 4 to 12.  

(4) 

“Law 27(I)/2020”, as it is referred to in Cyprus’ request of 6 August 2020, has been 
the basis for the introduction of a number of Regulatory Administrative Acts, outlining 
measures  to  address  the  impact  of  the  COVID-19  outbreak.    On  the  basis  of  Law 
27(I)/2020,  the  authorities  have  introduced  a  special  leave  scheme,  which  provides 
wage compensation to parents working in the private sector who have children up to 

1 

OJ L 159, 20.5.2020, p.1. 

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(5) 

(6) 

(7) 

(8) 

(9) 

the age of 15 or children with disabilities of any age. The special leave scheme can be 
considered a similar measure to short-time work schemes, as referred to in Regulation 
(EU)  2020/672,  as  it  provides  income  support  to  employees  and  helps  preserve 
employment by preventing parents, who have to look after their children while schools 
are closed, from needing to terminate the employment relationship. 

Furthermore, the authorities have introduced a scheme supporting companies for total 
suspension  of  operations,  which  provides  wage  compensation  to  90%  of  the 
employees  of  the  businesses  forced  to  suspend  their  operations,  conditional  on 
employment retention. The compensation covers 60% of the employee's salary or 60% 
of the employee's social  insurance units earned in 2018 (2019 for the period 7/2020-
8/2020),  whichever  is  the  greater.  The  compensation  ranges  between  a  maximum  of 
EUR 1 214 and a minimum of EUR 360 per month. 

The scheme supporting companies for partial suspension of operations provides wage 
compensation  to  the  employees  of  businesses  experiencing  at  least  a  25%  decline  in 
turnover  due 
the  pandemic,  conditional  on  employment  retention.  The 
compensation  covers  60%  of  the  employee's  salary  or  60%  of  the  employee's  social 
insurance  units  earned  in  2018,  whichever  is  the  greater.  The  compensation  ranges 
between a maximum of EUR 1 214 and a minimum of EUR 360 per month.  

to 

The  ‘special  scheme  for  self-employed’  provides  compensation  to  self-  employed 
persons  who  cannot  exercise  any  activity  according  to  the  decree  of  the  Minister  of 
Health and/or a decision of the Council of Ministers. 

The  ‘special  scheme  for  hotel  units  and  tourist  accommodation’  provides  wage 
compensation  to  support  employees  in  the  hotel  industry  and  other  businesses 
providing tourist accommodation whose employer has fully suspended their operations 
or experienced a decline in turnover of more than 40%. Participation in the scheme is 
conditional on employment retention. 

The ‘special scheme to support businesses related to the tourism industry or affected 
by  tourism  or  associated  with  businesses  that  are  subject  to  mandatory  total 
suspension’  provides  wage  compensation  to  the  employees  in  the  hotel  industry  and 
other  businesses  providing  tourist  accommodation  that  have  fully  suspended  their 
operations  or  experienced  a  decline  in  turnover  of  more  than  55%,  conditional  on 
employment retention. 

(10)  The ‘special scheme for supporting businesses exercising special predefined activities’ 
provides wage compensation to the employees of the businesses facing a decline of at 
least 55% of their turnover, conditional on employment retention. 

(11)  Moreover,  “Supplementary  budget,  Temporary  framework  for  State  aid  measures  to 
support  the  economy  in  the  current  COVID-19  Subsidies”,  as  it  is  referred  to  in  the 
Cypriot  request  of  6  August  2020,  introduces  subsidies  for  very  small  and  small 
enterprises and self-employed persons who employ up to 50 employees. Only the part 
of expenditure related to the support of self-employed and one-person companies has 
been  requested.  Those  subsidies  provide  a  lump  sum  grant  to  support  operating 
expenses of small businesses and the self-employed. The subsidisation scheme can be 
considered a similar measure to short-time work schemes, as referred to in Regulation 
(EU)  2020/672,  as  it  aims  at  protecting  the  self-employed  or  similar  categories  of 
workers from reduction or loss of income.  

(12)  Finally, the ‘sickness  benefit scheme’, provides  wage  compensation to  employees of 
the private sector and self-employed, on the condition that they are either classified as 

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vulnerable individuals according to a list published by the Ministry of Health, placed 
in quarantine by the Authorities, or infected by Covid-19. 

(13)  Cyprus fulfils the conditions for requesting financial assistance set out in Article 3 of 
Regulation  (EU)  2020/672.  Cyprus  has  provided  the  Commission  with  appropriate 
evidence that the actual and planned public expenditure has increased by EUR 479 070 
000 as of 1 February 2020 due to the increased amount directly related to the special 
leave  scheme  for  parents,  the  schemes  supporting  companies  respectively  for  the 
partial  and  total  suspension  of  their  operations,  the  special  scheme  for  the  self-
employed,  the  special  scheme  for  hotel  units  and  tourist  accommodation,  the  special 
scheme to support businesses related to the tourism industry or affected by tourism or 
associated with businesses that are subject to mandatory total suspension, the special 
scheme  for  supporting  businesses  exercising  special  predefined  activities,  and  the 
subsidisation  scheme  of  very  small  and  small  enterprises  and  self-employed.  This 
constitutes  a  sudden  and  severe  increase  because  these  new  measures  cover  a 
significant proportion of firms and the labour force in in Cyprus. 

(14)  The Commission has consulted Cyprus and verified the sudden and severe increase in 
the actual and planned public expenditure directly related to short-time work schemes 
and  similar  measures,  as  well  as  the  recourse  to  relevant  health-related  measures 
related  to  the  COVID-19  outbreak,  referred  to  in  the  request  of  6  August  2020,  in 
accordance with Article 6 of Regulation (EU) 2020/672.  

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

(16)  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. 

(17)  Cyprus 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 Cyprus has implemented that expenditure. 

(18)  The  decision  to  provide  financial  assistance  has  been  taken  taking  into  account 
existing  and  expected  needs  of  Cyprus,  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:  

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

Article 1 

Article 2 

1. 

2. 

The Union shall make available to Cyprus a loan amounting to a maximum of EUR 
479 070 000. 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.  

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3. 

4. 

5. 

6. 

The Union financial assistance shall be made available by the Commission to Cyprus 
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 
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.   

Cyprus  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.  

Cyprus may finance the following measures: 

Article 3  

a) 

b) 

c) 

d) 

e) 

f) 

g) 

the special leave scheme for parents, as provided for by Law 27(I)/2020, Regulatory 
Administrative Acts 127/148/151/184/192/212/213/235/2020; 

the schemes supporting companies for the partial and total suspension of operations, 
as  provided 
for  by  Law  27(I)/2020,  Regulatory  Administrative  Acts, 
131/148/151/188/212/213/239/2020 and 151/187/212/213/238/243/273/2020;  

the  special  scheme  for  the  self-employed,  as  provided  for  by  Law  27(I)/2020, 
Regulatory Administrative Acts, 129/148/151/186/213/237/322/2020); 

the  special  scheme  for  hotel  units  and  tourist  accommodation,  as  provided  for  by 
Law 27(I)/2020, Regulatory Administrative Acts 269/317/2020;  

the special scheme to  support businesses related to  the tourism industry or affected 
by  tourism  or  associated  with  businesses  that  are  subject  to  mandatory  total 
suspension,  as  provided  for  by  Law  27(I)/2020,  Regulatory  Administrative  Acts 
270/318/2020;  

the special scheme for supporting businesses exercising special predefined activities, 
as provided for by Law 27(I)/2020, Regulatory Administrative Acts 272/320/2020;   

the subsidisation scheme of very small and small enterprises  and self-employed,  as 
provided for by Supplementary budget, Temporary framework for State aid measures 
to support the economy in the current COVID-19, for the part of expenditure related 
to the support of self-employed and one-person companies;  

h) 

the  sickness  benefit  scheme,  as  provided  for  by  Law  27(I)/2020,  Regulatory 
Administrative Acts 128/148/151/185/212/236/2020. 

Cyprus  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 

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This Decision is addressed to the Republic of Cyprus. 

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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