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Regions and cities team up with EIB for local public investment and SMEs  

CoR's president Tzitzikostas: "Rising costs and shrinking revenues threaten regions' and cities' ability to protect people and help businesses"

Since the beginning of the COVID-19 pandemic, the mobilisation of regions and cities has prevented the collapse of many local businesses. However, the fall in fiscal income and the economic efforts taken by mayors and governors to protect citizens and SMEs could put local public finances at risk. During a debate with the President of the European Investment Bank (EIB), Werner Hoyer, and the Vice-President Lilyana Pavlova, members of the European Committee of the Regions (CoR) urged support for local public investment and SMEs.

Local and regional authorities are responsible for a third of public expenditure (33.6%) and for 53% of public investment in the EU. According to a CoR-OECD survey on the impact of COVID-19 on regions and cities, included into the first Annual Regional and Local Barometer , 65% of local and regional authorities put in place or contributed to direct support to businesses and the self-employed.

The unprecedented financial effort taken by regions and cities during the crisis could lead to a dangerous ‘scissors effect’: decreasing revenues and increasing expenditure, put public finances of municipalities, cities and regions in the EU at risk. The decrease of revenues in 2020 of subnational authorities in France, Germany and Italy alone is estimated to be in the order of EUR 30 billion for the three countries representing up to 10% of the respective totals.

These concerns were highlighted by the CoR Plenary during a debate with the president of the European Investment Bank, Werner Hoyer, and the Vice-President, ​Lilyana Pavlova.

The president of the CoR, Apostolos Tzitzikostas , underlined that "The rising costs for services and the shrinking fiscal revenues are threatening regions' and cities' ability to protect people and help local businesses. With the action plan 2021, the Committee and the EIB join forces to help them save jobs, become resilient and make their community greener and more digitalised. The many stories shared today by CoR members show that the EIB is closer than ever to regional and local authorities . This cooperation is a strategic asset for our Union as Europe's recovery can only be built in partnership, from the bottom up".

President Hoyer said: “ In response to the coronavirus pandemic, the EIB has quickly mobilised to deploy a support plan to help meet the most urgent financing needs, including those of regions and municipalities. To date, we have approved financing of nearly EUR 25 billion for COVID-19-related investment to improve public health, strengthen public services and support affected companies. At the same time, our recovery from the crisis must also be the opportunity to accelerate the transition to a greener and more sustainable future that leaves no one behind. Our long-term financing of urban and regional development projects thus continues with an overarching focus on climate action and cohesion ”.

Vice-President Pavlova stated : “ The EIB values the excellent and well-established relation with the Committee of the Regions that has been a key player in connecting us to regional and local decision makers. We are looking forward to reinforcing our successful cooperation even further in our renewed CoR-EIB Group joint action plan for 2021. Cities and regions have been a partner of choice for the EU Bank for more than 60 years. As they face unprecedented challenges, the EIB is fully committed to support investments that make our cities and regions recover and prosper. Through its wide range of financing instruments and advisory services, the EIB also stands ready to continue to complement EU funds during the next Multiannual Financial Framework ”.

Despite the devastating effect of the Covid-19 on enterprise liquidity and revenues, SMEs remain the backbone of the European economy and their performance is key for a swift economic recovery . The EU SME Strategy needs to promote a strong partnership between local, national and EU authorities for the development of resilient local and regional entrepreneurial ecosystems. This request is included into the opinion entitled SME Strategy , drafted by Eddy Van Hijum (NL/EPP), Member of the Council of the Province of Overijssel, adopted by the CoR Plenary.

"SMEs in sectors such as tourism, retail and manufacturing industries are heavily hit by the corona crisis. There is no recovery of the economy without recovery for SMEs. Regions can play a crucial part in making sure financial support and recovery measures are there for SMEs, as well as providing structural support towards the twin transitions for a Digital Europe and the Green Deal" underlined the rapporteur Eddy Van Hijum.

The CoR welcomes the SME Strategy for a sustainable and digital Europe presented in March by the European Commission. Its publication has never been more timely and its effective roll-out calls for commitment and ownership at regional and local level. However, local and regional leaders advocate that the Strategy needs to address the diverse needs of SMEs and believes that this diversity is not sufficiently operationalised so far.

European SMEs need a genuine level playing field in a completed and deepened Single Market. Therefore, the CoR calls for a rigorous implementation of the SME test in the impact assessment of EU legislation and for a stronger enforcement of the Single Market legislation in the EU Member States. By assessing the costs and benefits of policy options, the SME Test analyses the possible effects of EU legislative proposals on small and medium enterprises.

Together with self-employed workers and micro-enterprises, SMEs are especially vulnerable to the effects of lockdown. Due to their size, they are less resilient than larger businesses. According to an SME United survey included into the Barometer, about 40% of SMEs report liquidity problems as a consequence of the economic lock-down. In the most affected sectors like hospitality, retail and construction, 50% of SMEs have liquidity shortage. This is further confirmed by the EIB, which reported a steep rise in SMEs' credit demands in the first half of 2020, going hand in hand with tightening credit standards in the euro area.

Contact:

Matteo Miglietta

Tel. +32 (0)2 282 2440

Mobile: +32 (0)470 895382

matteo.miglietta@cor.europa.eu