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EU Governments rolling back wage support despite cloudy outlook

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Government around Europe have generally continued to push for a re-opening of the economy, insisting that they can no longer afford to pay the same levels of wage support as covered in the past months.

A number of EU governments are curtailing their emergency wage-support schemes, which were aimed at preserving jobs in the coronavirus crisis, even as the pandemic continues to cloud the near-term economic outlook — despite protests by trade unions.

Europe’s welfare model worked very well throughout the first months of the pandemic, with governments putting in significant amount of cash to cover the wages of millions of workers. According to the European Trade Union Confederation, 45 million Europeans has their job suspended and were receiving at least part of their salaries through government support schemes.

But these emergency measures are costly for state coffers, and governments are feeling the pressure on their bottom line.

The OECD estimates that 55 percent of the private workforce in France were on such schemes, 45 percent in Italy and 25 percent in Germany. These were largely successful. In comparison with the U.S., where unemployment rose by 22.2 million in March and April combined, job losses in Europe over the same period amounted to 638,000, according to figures published Eurostat.

It was evident that the massive use of short-time work has avoided stronger increases of unemployment and job losses, but as economic activity has started to pick up following the easing of lockdowns, governments are moving to cut back the aid measures.

In Spain, these schemes end in September, while in the United Kingdom, the employer contribution has increased as from this month. In France and Austria, such incentives were also rolled back. However, with the virus re-emerging in parts of Europe, and economic forecasts remaining grim, workers’ are concerned about this dwindling support. The European Commission’s latest forecasts see a contraction in economic activity across the EU of 8.3 percent this year, with declines of more than 10 percent projected for Italy, Spain and France — before an anticipated rebound in 2021.

In comments to Politico, Luca Visentini, chief of ETUC, the European trade unions’ lobby said: “We are insisting in all the countries about the need to prolong [short time support schemes] at least until the end of the year. It’s “quite early to remove the measures because this could lead to massive dismissal. Taking a decision like that now will be very, very counterproductive.”

By Autumn, EU governments should be able to access SURE — the Commission’s €100 billion loan program, meant to backup national wage support schemes. Spain already announced it’s requesting a €20 billion loan.

via Politico

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