A new report by the European Court of Auditors (ECA) shows that labour market reforms under the EU’s €650 billion post-pandemic recovery fund have had limited impact, with most countries failing to address key structural challenges.
Reforms introduced by member states under the EU’s €650 billion post-pandemic recovery fund (RRF) have had only a limited impact on their labour markets, according to a new report by the European Court of Auditors (ECA).
“Brussels uses RRF funds as an incentive for EU countries to undertake important structural reforms and make their economies more resilient,” said Ivana Maletić, the auditor in charge of the report.
“However, in the area of labour market policies, the reforms bypassed some structural issues that are of particular importance for EU citizens,” Maletić added.
Under the so-called Recovery and Resilience Facility (RRF) established in response to the COVID-19 pandemic, the EU linked funding for member states to economic and social reforms for the first time, including in the area of labour and employment policies.
In their national recovery and resilience plans, EU countries included 98 labour market reforms of different scope and ambition, but the majority did not meet expectations or align with the level of ambition set in the regulation, according to the new audit.
The reforms substantially addressed only 40% of the key national recommendations, marginally addressed 26%, and did not address 34%.
“This was really striking — to find that basically two-thirds of country-specific recommendations in the field of labour markets were not at all or only marginally addressed,” the lead auditor told reporters on Wednesday morning.
The audit argues that some national reforms had the potential to address structural challenges in the labour market, such as the French reform of unemployment insurance, while others are unlikely to have a lasting impact, such as a 2021 German Social Guarantee.
Four countries — Denmark, Hungary, Ireland, and Slovakia — did not include any reforms to tackle the EU’s recommendations.
“Moreover, there is so far no evidence for about half of the reforms that they have led to tangible results or impacted the member states’ labour markets,” Maletić said.
Overall, the proposed reforms have achieved some outputs, but specific targets, like those related to gender equality, which is highly prominent in the RRF regulation, are only addressed by 10% of the introduced labour market reforms.
“We live in a time where resources are very scarce, and we really have to try to use them in the best way and get the best value for money,” the Luxembourg-based auditor argued.
The EU’s financial watchdog has called on the Commission to create a framework for assessing the results of reforms, ensuring that national plans properly address key challenges and thoroughly checking that the targets and milestones set out in the reforms are being met.
“We are not against this change of approach from cost reimbursement to performance-based, but when we do this, we have to be careful that we have baseline figures, that we know what we want to achieve in the different policy areas, and that we can measure whether we are achieving these or not,” Maletić stressed.
The auditor concluded that there is still “significant” room for improvement in designing, implementing, and measuring the results of these reforms.
The Commission accepted or partially accepted the auditors’ recommendations, while stressing that it has “no legal basis” to require member states to introduce new reforms and investments to address specific additional challenges identified in the country recommendations.
The EU executive also noted that the proportion of challenges addressed in the national recovery plans could be higher, as investments were not considered in this audit, but are crucial to address certain types of challenges relevant to the audit theme (e.g. skills development or active labour market measures).
The institution finally recalled that measures not specifically dedicated to these policy areas may also contribute to addressing labour market-related challenges.
