Last November and December, the next long-term EU budget was approved along with Next Generation EU (NGEU), a temporary instrument aimed at boosting the recovery from the economic impacts of COVID-19. NGEU will be the largest stimulus package ever financed in the EU and represents a further step in European integration, as it is the first time there is common debt issuance by the Commission. (Recovery and Resilience Facility, 2021)
The Recovery and Resilience Facility (RFF) is the main pillar of NGEU and consists of €723.8 billion in loans and grants available to finance reforms and investments across member states. The aim of each country’s plan, as stated by the Commission, is to apply reforms targeted at increasing the potential growth of EU economies. This will not only help European economies getting out of this crisis in the short/medium-run but also maintain a more robust and durable growth in the long-run. (Recovery plan for Europe, 2021)
As stated by (Darvas et al., 2021), and following the Commission’s instructions, the largest share of the funds will be applied to the transition to a Greener and more digitalized economy, although member states with larger funds will also apply considerable shares to other areas. These are the two areas the commission considers vital for the implementation of structural reforms, which will theoretically lead to a higher potential GDP. As of the writing of this article, more than half of the total number of plans have been approved by the commission.
(Ferrer, 2021) points out some of the main risks to the success of the recovery programs. Among those are a lack of focus and mistargeting, maintaining unsustainable sectors and delays in implementation. “Lopriore and Vlachodimitropoulou (2021)” have pointed out trends in the so-far approved plans such as a balance between demand and supply-side measures as well as between restorative and transformational investments and made recommendations: prioritize “value for money” over “absorption” by careful planning and management of investment, which should be in most part, productive and forward-looking, although still being able to apply most funds before the expiration date.
Another observation is made by (Bénassy-Quéré, 2021), Chief Economist at the French Treasury who says that, from the so-far approved plans, “it is clear that the NRRPs are not Keynesian-style stimulus plans, but rather plans for the transformation and efficiency of European economies.”. This is another sign that Commission’s orientations for the appliance of the plan are being generally followed by the member states.
Whether with more demand or supply oriented policies, in more restorative or transformational investments, member states must not lose this opportunity to launch a greener and build a more robust economy for the future, or they risk slowing down the European Integration process and, given the high level of debt, becoming more vulnerable to fluctuations in the global financial markets.
- Bénassy-Quéré, A., 2021. A good read for the summer: the National Recovery and Resilience Plan!. [online] Direction générale du Trésor. Available at: <https://www.tresor.economie.gouv.fr/Articles/2021/07/16/a-good-read-for-the-summer-the-national-recovery-and-resilience-plan> [Accessed 16 September 2021].
- Darvas, Z., Domínguez-Jiménez, M., Idé Devins, A., Grzegorczyk, M., Guetta-Jeanrenaud, L., Henry, S., Hoffmann, M., Lenaerts, K., Schraepen, T., Tzaras, A., Vorsatz, V. and Weil, P., 2021. European Union countries’ recovery and resilience plans | Bruegel. [online] Bruegel.org. Available at: <https://www.bruegel.org/publications/datasets/european-union-countries-recovery-and-resilience-plans/> [Accessed 16 September 2021].
- European Commission – European Commission. 2021. Recovery and Resilience Facility. [online] Available at: <https://ec.europa.eu/info/business-economy-euro/recovery-coronavirus/recovery-and-resilience-facility_en> [Accessed 16 September 2021].
- European Commission – European Commission. 2021. Recovery plan for Europe. [online] Available at: <https://ec.europa.eu/info/strategy/recovery-plan-europe_en> [Accessed 16 September 2021].
- Ferrer, J., 2021. Avoiding the Main Risks in the Recovery Plans of Member States. SSRN Electronic Journal,. Lopriore, M. and Vlachodimitropoulou, M., 2021. Recovery and Resilience Plans for the Next Generation EU: a unique opportunity that must be taken quickly, and carefully. [online] Eipa.eu. Available at: <https://www.eipa.eu/wp-content/uploads/2021/02/EIPA_Paper_Recovery-and-Resilience-Plans-for-the-Next-Generation-EU_Digitaal.pdf> [Accessed 16 September 2021].
Student of the Master’s Degree in Economics
Nova School of Business and Economics