The EU support to mitigate unemployment risks in an emergency (SURE) was a prompt response during the COVID-19 pandemic but its impact in the EU member states is not sufficiently known, according to an audit report published by the European Court of Auditors (ECA) last week.
As previously reported by The Brussels Times, the new initiative to provide loans to member states to fund short-term work schemes during the coronavirus crisis was presented by the European Commission in beginning of April 2020, less than a month after the WHO declared that the health crisis was a pandemic.
The COVID-19 pandemic put millions of jobs in Europe at risk. There is no doubt that the European Commission reacted rapidly by introducing the SURE tool for the member states. They could use the money to create or extend their job-retention schemes such as short-time work (including for self-employed), furlough and wage subsidies, and for health measures.
However, there was a catch. The loans provided under SURE had to be underpinned by a system of voluntary guarantees from the member states. To this end, a minimum of committed guarantees, 25% of the maximum amount of loans up to €100 billion, was needed to reduce the credit risk for the EU according to the Commission.
Speed and/or impact
In fact, all member states had to participate with guarantees for SURE. Some member states, the so-called “frugal” countries in various combinations (Austria, Denmark, Sweden, the Netherlands, Germany and Finland) opposed in the beginning that the Commission would finance SURE by issuing bonds from borrowing on the capital markets. These countries already had nationally funded job retention schemes in place and would not need the loans.
That delayed the implementation of the new scheme under a critical period of lockdowns and it would take until September 2020 for SURE to become activated after all 27 member states had agreed to guarantee the loans in an act of European solidarity. The first loans to member states were distributed in October of the same year. This part of the decision-process was outside the scope of the audit.
Overall, ECA concluded that the Commission acted quickly compared to standard funding procedures but hints in the report that the speed might have come at the expense of impact and control. According to ECA, the lack of special arrangements made it difficult to assess the impact of SURE. The Commission did not see any need to assess the complementarity of SURE support with national measures.
Nor were extra measures put into place to control that the money was not wasted in a policy area (job retention schemes) which is known to be prone to potential irregularities and misuse. Largely, the Commission relied on the existing control systems in the member states.
It did not come as surprise that almost all participating member states reported that they had detected instances of irregularities or fraud. In all such cases, the member state concerned carried out an investigation. This led to legal action to recover improperly used funds in 13 countries. The audit does not say whether the fraud or error rate was higher than usual.
Uneven distribution
“SURE reflected the emergency context and made EU funds available quickly and efficiently to cushion the pandemic’s impact on workers and firms,” said Iliana Ivanova, the Bulgarian ECA member who led the audit, and a former MEP. “However, its full impact on the ground is still unknown. Despite some indications of success, there is not enough hard data to assess how many jobs were actually saved.”
Nineteen ‘non-frugal’ countries have requested loans and nearly €92 billion had already been disbursed when the audit report was drafted in record time. SURE was a temporary measure and the period of availability ends on 31 December 2022. The loans provided to Italy, Spain and Poland account for more almost 60 % of that amount.
The Commission estimated that the countries using SURE have saved around €8.5 billion in interest payments thanks to the EU’s high credit rating. They are concentrated in five of the benefiting member states (Italy, Spain, Romania, Poland and Greece), ranging between €0.5 billion and €3.8 billion, and accounting for almost 86 % of the total estimated savings.
By chance, the very same day the audit was published (14 December), the Commission announced that it had disbursed over €6.5 billion in the final transaction under SURE, in total €98.4 billion of financial assistance to the 19 member states. According to the Commission, SURE “successfully” helped member states mitigate the impact of the pandemic in 2020 and “supported the rapid recovery” in 2021.
The Commission published four bi-annual reports on the implementation of SURE based on data reported from them. The latest report on SURE shows that the instrument supported approximately 31.5 million people and 2.5 million firms in 2020, and 9 million people and over 800,000 firms in 2021. In June 2021, SURE won the European Ombudsman 2021 Award for Good Administration.
Evaluation or not
But ECA found that the figures are largely uncertain estimates and not reliable and that a full-fledged evaluation needs to be carried out by the Commission to assess the results and impact of SURE and learn lessons in time for next crisis. That is also the main and only audit recommendation.
By the end Q3 of 2024, the Commission should evaluate the “experience of SURE”, including the extent to which SURE and the national measures it supported added value, and whether the SURE framework was effective in minimising the risk of irregularities and fraud, given the cases reported by member states.
According to ECA, an evaluation is not mandatory in the SURE regulation. In this case, however, it is possible that ECA pushed at open doors. A Commission spokesperson told The Brussels Times that the Commission in any event foresaw the evaluation as it is a legal obligation in the financial regulation to evaluate spending programs exceeding €5 million.
While the Commission in its reply to ECA argues that SURE was successful, and provided proof for that, it accepted the recommendation, but more as a complement to its own reporting on SURE so far.
An evaluation will no doubt fill some data gaps but if the figures are correct, it will hardly change the overall picture that those who benefited from SURE represented almost one third of total employment and firms in 19 beneficiary member states. The main lesson learned in that case will be that the ‘frugal’ countries were wrong in opposing SURE.
M. Apelblat
The Brussels Times
