Sustainaweekly - What was the social impact of the EU’s EUR 92 bn SURE programme?
The EU reports on the impact of its pandemic programme: Support to mitigate Unemployment Risks in an Emergency (SURE). They show that EUR 91.8 bn in social bonds was used to protect jobs and incomes in member states. The EU claims that around 1.5 million people were prevented from unemployment in 2020. Does that mean the SURE was a success?
In its , the EU recently assessed the so-called SURE programme. SURE – Support to mitigate Unemployment Risks in an Emergency – was a crisis instrument that aimed to raise EUR 100 bn via the issuance of social bonds to protect jobs and workers’ incomes during the Covid pandemic. Because all EU Member States provided bilateral guarantees, the EU could borrow at very favourable conditions to finance loans to member states. In the last quarter of 2020 and the first half year of 2021, most of the loans were issued. In 2022 the latest EUR 2.2 bn was disbursed. Right now EUR 93.3 bn is granted to member states, of which EUR 91.8 bn has been disbursed to member states. As there doesn’t seem to be new unemployment schemes coming up and the SURE instrument ceases to exist at the 31st of December, this fourth bi-annual report seems to give a good overview of the impact of the programme.
The EU shows that EUR 91.8 bn in social bonds was used to protect jobs and incomes in member states
The vast majority of the EUR 91.8 bn that was disbursed to member states has been allocated to short-time work schemes and similar measures for the self-employed. 50% of the total expenditure went to short-time work schemes, 32% to measures for the self-employed, 9% to wage subsidies and 6% to other measures such as sick-leave benefits. All these expenditures fit the policy goal of ‘protecting jobs and incomes’. However, some countries made more use of the SURE loans than others.
Italy and Spain, with just 18% of the EU’s GDP and 24% of its population, together claimed more than half of the SURE loans. Germany, France, the Netherlands, Austria, Denmark, Finland, Luxembourg and Sweden didn’t take any SURE loans since they either didn’t have unemployment programmes, didn’t aim to run bigger budget deficits to fund them, or, of course, could borrow at relatively favourable conditions already.
There is also a big divergence in impact on the budget. Apart from the eight member states that did not borrow, we see that SURE loans could be either just 1% of the total government expenditure (in the case of Hungary), or up until 7% (Malta). The countries that take relatively big loans usually have a bigger number of different programmes that are all applicable for funding under the policy goal of ‘protecting jobs and incomes’.
The EU claims that around 1.5 million people were prevented from unemployment in 2020
As one of the SURE conditions, member states have to regularly send reporting tables to the EU on, for example, number of people and firms that were supported. Neither the EU or a third party checks these tables, so the bi-annual reports of the EU rely fully on self-reporting. The EU adds up the reporting tables from all the 19 member states that joined the programme and present these totals in their bi-annual reports. These totals tell us that SURE supported 31.5 million people and 2.5 million firms. These 31.5 million consist of an estimated 22.25 million employees and 9.25 million self-employed. Of these 22.25 million employees, 1.5 million are estimated to have been prevented from becoming unemployed in 2020. This is simply the difference between what member states estimated to be their policy measures before and after the SURE loans were taken.
Does that mean the SURE program was a success?
Reading the individual reporting of member states and the 4th bi-annual EU report, five questions arise on the reliability of the estimate of 1.5 million people that were saved from unemployment.
1. Of the 19 member states that took SURE loans, 15 have spent more than the amount granted using national funds. This means that a part of the 1.5 million people that are claimed to be prevented from unemployment, were prevented from unemployment by national spending. It is of course possible that this national expenditure wouldn’t have taken place if there were no SURE loans. One could, however, also claim that there would have been more national expenditure if there wouldn’t have been SURE loans. Member states felt the need to protect employment and if SURE wouldn’t have been there, they could have chosen for the second cheapest option: borrowing directly themselves.
2. The EU claims that, at a country level, the higher the amount received through SURE in 2020, the more moderate was the rise in unemployment among beneficiary member states. This claim is correct in the sense that there is a correlation. But it is possible that there are third factors that cause member states to both apply for a big SURE loan and have a moderate rise in unemployment. For example, countries that usually borrow at higher interest rates and have bigger deficits, could have a lower percentage of jobs that are vulnerable to Covid measures such as service sector jobs.
3. As stated in the EU’s bi-annual report, it is difficult to design a counterfactual scenario of labour market performance in the absence of SURE. Unemployment could, as the member states claim, have risen more in the absence of employment programs. However, they made these claims at the moment they were applying for a loan. Nationally funded employment programs could have led to the same unemployment outcomes, but could just have been more expensive.
4. Self-reporting is also not a reliable method when the reporting party has a financial stake in the way the results are perceived. Countries that are in favour of more future joint debt have an incentive to present current joint debt initiatives as successful. Member states did not follow a fixed and transparent method when self-reporting.
5. The number of 1.5 million could also be too low. The unemployment forecasts could be based on a number of bankrupt companies or a number of lay-offs. In a normal economy, these numbers could lead to a number of 1.5m unemployed. In economies with Covid measures however, it is more difficult to find a new job after losing one. People were discouraged from actively seeking employment due to the shutdown of large parts of the economy.
While we can’t say for sure how many people were prevented from becoming unemployed from the EUR 91.8 bn borrowed by the EU, we can say that this initiative was probably the best given the circumstances. Policy tools using social bonds were never on this scale before. As there is on the question of whether there should be new EU-denominated debt, it is fair to say that SURE discovered unknown terrain and will possibly be very valuable in developing instruments like this one in the future.