Johan Van Overtveldt is chair of the Budget Committee and Recovery and Resilience Facility Working Group in the European Parliament.
The COVID-19 pandemic has had a huge impact on our economies, and has put millions of jobs at risk.
The EU aimed to act quickly and reduce the risk of mass layoffs. and did so by quickly implementing Assistance to reduce the risk of unemployment in emergency (Sure) Program – a temporary emergency instrument providing loans of up to €100 billion to member countries for new or existing job plans.
Announced in April 2020, and fully implemented in December 2022, the Sure Instrument is the predecessor to the existing €723.8 billion Recovery and Resilience Facility (RRF), both are financed by raising money from the capital markets – not through money from the EU’s seven-year long-term budget multi year financial framework (mff). And this new way of working is supported by the European Commission and most – but not all – member states.
But while the RRF is still in its implementation phase, some member states are already growing a new appetite for EU cash – and this is a problem for a number of reasons.
EU ambassadors are already discussing the possibility of a new European fund, financed with joint borrowing as a byproduct of the US’ massive new green-transition industrial subsidies. And European Council President Charles Michel has ambitions to do so “as a way to guarantee solidarity between member states, knowing that not all member states have the same financial capacity.”
Yet, at the same time, billions in COVID-19 recovery funds remain unused and available to Europe’s member states, with several EU agencies already warning that countries may run out of large amounts of money before the end of 2026. having difficulty absorbing. If member states did not even fully absorb the previous MFF, why create a new borrowing instrument as countries struggle to spend available recovery funds?
Additionally, using the SURE instrument as an example for a new potential fund is the wrong approach.
The European Court of Auditors (ECA) has a initial assessment and concluded that after disbursement of €98.4 billion, it is unable to evaluate how effective the instrument was and how many jobs were actually protected. informal contacts in the ECA say that the lack of good national data and the design structure of the equipment make it difficult to assess,
In this context, it is also worth noting that of the countries using SURE, all but one have reported irregularities and alleged fraud. The Commission should not take SURE as an example, but instead see it as an opportunity to explore how to more efficiently evaluate the way it works.
In the end, the EU’s new strategy of borrowing money on capital markets to allow member states to take out cheap EU loans turns out to be a slippery slope, not least because the Commission is determined to achieve competitive rates and loan terms. unable to.
Providing another round of EU money through a new financial instrument is not the right solution here. And member states should instead focus on reforms to make themselves more competitive. Not doing so risks jeopardizing the EU project by creating a European debt factory.