• Posted 23-Nov-2020

The pandemic is a threat to municipal and regional finances in Europe, a joint CoR-OECD survey warns

The COVID-19 crisis is strongly affecting regions and cities in Europe. According to a joint CoR-OECD survey presented during the ECON commission meeting, most local and regional authorities expect the socio-economic crisis to severely affect their finances.

Beyond the health and human tragedy, COVID-19 is having a profound effect on local and regional authorities (LRAs). To better understand it, the European Committee of the Regions (CoR) and the Organisation for Economic Cooperation and Development (OECD) carried out an online survey in June and July 2020 on The impact of COVID-19 on regional and local governments. The results were presented during the CoR's commission for Economic policy (ECON) meeting, with the participation of Dorothée Allain-Dupré, Head of OECD Decentralisation, Subnational Finance and Public Investment Unit.

The survey confirms the severe effect of the COVID-19 crisis on regions and cities in the European Union. For 63% of respondents, the overall impact is "strong" or "very strong". Nearly half of LRAs (46%) reported that the main challenge in dealing with the crisis has been the lack of technical means and equipment, while 39% indicated the lack of financial resources. At the time of the survey, only around half of the respondents stated that coordination within LRAs or with national governments had been effective.

Some of the survey's key findings fed into the first EU-wide Annual Regional and Local Barometer, presented on the 12 October by the CoR's president Apostolos Tzitzikostas, during the 18th European Week of Regions and Cities

The crisis is affecting sub-national authorities' revenues, with a dangerous "scissors effect" of increasing expenditure and falling revenues. 86% of regions and cities expect a high or moderate negative impact on their expenditures, particularly in social services (64%) and social benefits (59%). Meanwhile, on the other hand, 90% forecast a revenue decrease. Tax revenue is anticipated to be the most likely affected revenue source: 83% of respondents foresee a large or moderate decrease.

At the time of the survey, about 24% of subnational governments planned to ask for new borrowing to cope with the crisis. 13% of respondents had already applied for additional EU funds and 49% were considering doing so.

The survey also shows that the COVID-19 crisis may reshape priorities in regional development policy. LRAs are calling for more focus on affordable and accessible quality basic services including health to all territories (76%), regional resilience (69%) and reducing digital divides across regions (68%).

Source: European Committee of the Regions (https://bit.ly/39ljPgL)