Delays in the payment of the EU’s COVID-19 recovery fund severely hamper the ability of member states to recover from the pandemic, according to the European Court of Auditors (ECA), Euractiv reports.
The ECA report noted that by the end of 2023, EU countries had spent less than a third of the €723bn originally allocated to the Recovery and Resilience Facility (RRF). Auditors also warned of additional risks of delayed absorption before the RRF’s scheduled expiration in August 2026.
Ivana Maletić, the study’s lead author, stated:
“The RRF was a crisis instrument and [the EU] was supposed to do everything very, very quickly in order to recover [member states’] economies. How can you recover if you don’t invest quickly?”
Maletić added that the main reasons for the delays were member states’ uncertainty about the rules for implementing the RRF, their underestimation of the time needed to implement the reforms, and especially the lack of administrative capacity.
The problem [of a lack of administrative capacity] is not only at the level of public administration. The problem is also at the level of the private sector, because then [the government has a] tender, but they don’t have firms who are actually applying to these tenders because (…) they simply don’t have the capacity.
Approved at the peak of the COVID-19 pandemic in 2020, the RRF was designed to stimulate EU economies in the post-pandemic period by financing critical green and digital investments in exchange for targeted reforms. It initially consisted of €338 billion in grants and €385.8 billion in debt-financed loans.
However, a lack of engagement by Member States led the Commission to reduce the fund’s available resources from €723 billion to €648 billion earlier this year.
The ECA highlighted that the minimal impact of the RRF on the EU’s “real” economy was compounded by the fact that of the €213bn of allocated funds, less than half eventually reached the intended final recipients.
The auditors also noted that some Member States interpreted the term “final recipient” to refer to the companies or public institutions that actually receive the funding. Others understood the term to refer to government ministries or institutions that simply allocated the resources of the fund.
“Even this €100 billion [is] not something that is inserted in the economy. It’s still, in many cases, at the level of the ministries and other public bodies. We need to know how much money will reach the real economy, and who are the beneficiaries of this money.”
Zsolt Darvas, senior fellow at EU policy think-tank Bruegel, said that strong opposition from Germany, the Netherlands, and Sweden meant that the chances of extending the RRF beyond 2026 were slight.
The RRF came to life because COVID-19 hit Europe. In the absence of another big external shock, I would give a low probability that RRF will continue, and I don’t think that the implementation pace has an impact on that.
