(Bloomberg) -- The European Union proposed using as much as 40 billion euros ($39.2 billion) from the bloc’s budget to support people and companies struggling to cope with high prices caused by the energy crisis.

The European Commission will offer governments the ability to tap existing cohesion funds to support small- and medium-sized companies affected by the price hike of gas and electricity and to help vulnerable households pay their energy bills through national programs, according to Elisa Ferreira, the EU’s cohesion and reform chief.

“Cohesion policy is not the European crisis response instrument, but nevertheless we had to react when citizens were really struck,” Ferreira told lawmakers in Strasbourg on Tuesday. “We could not ignore the difficulties member states, small and medium companies and families are facing with present energy prices.”

The plan would be part of the package of proposals the commission will unveil on Tuesday to address the high energy costs fueled by Russia’s invasion of Ukraine. EU leaders are expected to discuss the new set of measures at an Oct. 20-21 summit in Brussels.

New Instruments

EU member states have earmarked more than €500 billion to cushion the impact of the energy crunch on consumers and businesses. In addition, the commission and governments are discussing new instruments to address the energy crisis since there is no common agreement on how to finance the new spending. 

The plan to use existing cohesion funds would also include providing support for access to the labor market by protecting the jobs of employees and the self-employed through short-time work and other similar schemes, according to a draft of the proposal, which is still subject to change.

The additional flexibility given by the EU´s executive arm to member states will mimic the decision taken during the Covid-19 crisis to cope with the pandemic and in the aftermath of Russia’s invasion of Ukraine to support fleeing refugees in EU territory. The final figure available per member state would depend on the volume of cohesion funds that remains uncommitted by the national government. 

(Updates with European Commission comment in the third paragraph.)

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