Immediately after the outbreak of the Covid-19 pandemic in spring 2020, the European Union had adopted emergency fiscal measures, according to its figures, amounting to 540 billion euros. EU member states and companies based in Europe were thus provided with loans and loan guarantees as collateral to cushion the economic impact of the Corona pandemic. However, a study by the Leibniz Institute for Financial Research SAFE shows that the size of these safety nets is not very realistic: The calculations of SAFE researcher Vincent Lindner put the sum of the emergency measures at more like 125 billion euros.
The SAFE study shows that the reception of the aid programs launched by the EU has been very uneven, with in particular southern European member states benefiting from EU aid. “In contrast, northern and central European but also eastern European states either did not take up the aid at all or received far fewer loan commitments compared with countries in southern Europe,” says Lindner.
Southern European countries benefit most from EU loan guarantees
The SURE program (“Support to Mitigate Unemployment Risks in an Emergency”, volume: 100 billion euros) has so far provided loans worth almost 95 billion euros to a total of 19 countries, which means that it has almost been exhausted. The main beneficiaries in relation to their respective gross domestic product are southern European countries such as Portugal, Greece, Malta, and Cyprus. Spain and Italy have also exhausted the maximum support. Central and Eastern European countries, on the other hand, benefited to a much lesser extent.
Meanwhile, the aid loans under the “Pandemic Crisis Support” program (PCS, volume: 240 billion euros) set up by the European Stability Mechanism (ESM) have proved to be slow sellers. No EU member state has yet applied for aid from the PCS. “In theory, the PCS would also allow some countries to borrow more favorably, and the conditions are similar to the SURE program. However, the example of Italy shows that the ESM provision has heavily politicized the aid programs. This is a missed opportunity,” explains Vincent Lindner.
Eastern European countries suspend participation in European Guarantee Fund
From April 2020 to May 2021, loan guarantees totaling 12.3 billion euros were approved from the Pan-European Guarantee Fund (EGF; volume: 200 billion euros). Projects involving several countries accounted for the largest share, followed by Spain, France, Italy, and Portugal. By contrast, only one project was approved for Germany, which is the largest contributor to the EGF alongside France and Italy. “It is significant that the Czech Republic, Estonia, Hungary, Latvia, and Romania did not even participate in the EGF. Here, the fragmentation of the EU is particularly evident,” Lindner said.
The SAFE Working Paper does not only compare the three EU aid programs SURE, EGF, and PCS, but has used additional data and information provided by the EU Commission, the Council, the Eurogroup, the ESM, and the European Investment Bank. In addition, numerous legal documents, as well as quantitative and qualitative EU reports and newspaper articles, were evaluated and interviews with experts were conducted.