The European Commission adopted on 21 February a Communication marking the two-year anniversary of the creation of the Recovery and Resilience Facility (RRF), the key instrument at the heart of the EUR 800 billion NextGenerationEU recovery plan for Europe.
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What is today’s Communication about?
The two-year anniversary of the entry into force of the Regulation establishing the Recovery and Resilience Facility (‘RRF’), the key instrument at the heart of the EUR800 billion NextGenerationEU recovery plan for Europe, is an opportunity to reflect on the achievements and challenges of this unprecedented instrument. These are laid out in today’s Communication.
The RRF was established in the midst of the COVID-19 pandemic to help Member States recover faster and become more resilient. Its implementation is taking place in a constantly evolving context, marked by global instability, Russia’s war of aggression against Ukraine, high inflation, and an energy crisis.
Thanks to the foresight of its design and its priorities, the RRF remains at the core of our European efforts to address these new challenges and respond to the evolving needs of Member States. Now is the time to take stock of the experience gained over the past two years to ensure a continued successful rollout of the RRF.
Is the implementation of the RRF on track?
The implementation of the RRF is firmly underway, with all national plans in place, including the revised plans of Luxembourg and Germany, and 16 payment requests already processed, another three already positively assessed and awaiting the Council’s opinion, and eight with an assessment ongoing.
To date, the Commission has disbursed a total of over EUR144 billion under the Facility, in both grants (EUR97 billion) and loans (EUR47 billion). These figures include the pre-financing disbursed to Member States in 2021 (EUR56.5 billion).
Detailed and up-to-date information on the state of play of the RRF in each Member State, as well as overall information on the Facility are available on the RRF website and on the Recovery and Resilience Scoreboard.
What are the achievements of the RRF to date?
Thanks to its unique design, the RRF swiftly provided significant financial support to Member States to address their economic and social challenges in the aftermath of the COVID-19 crisis, fast-forwarding the twin green and digital transitions, and strengthening their resilience for future challenges. Around EUR 203 billion is committed for climate action and EUR 131 billion to support the digital transition. Pre-financing disbursed to Member States in 2021 (EUR 56.5 billion) provided fast direct support to national budgets, playing a stabilising role in the aftermath of the unprecedented economic and social shock caused by the COVID-19 pandemic, thereby also helping to kick-start the recovery in the Member States.
The RRF is already playing a visible role in supporting investment levels and the quality of investments and reforms. The EU economy closed the gap with its pre-pandemic output levels in summer 2021, supported by the unprecedented, coordinated response to the COVID-19 pandemic, including under NextGenerationEU. In 2022, the EU’s GDP is forecast to have grown by 3.5%, and the unemployment rate has reached a historic low of 6.1% in December, despite the additional shocks brought by Russia’s illegal war of aggression against Ukraine. RRF disbursements and implementation are set to reach their highest level in 2023, supporting public and private investment and reforms. The public investment to GDP ratio is projected to increase from 3.0% in 2019 to 3.4% of GDP in 2023. Half of this increase between 2019 and 2023 is supported by EU financing and RRF funding. In parallel, Member States are seeing an unprecedented delivery of structural reforms in response to the European Semester country-specific recommendations.
Funding the RRF has contributed to making the EU one of the largest issuers of euro-denominated bonds. Driven by the RRF financing needs, in 2022 EU gross issuances amounted to EUR 119 billion in long-term instruments. The recent changes in bond market conditions have not altered the EU’s strong market access; the EU’s high credit rating and the Commission’s unified funding approach allow it to borrow on advantageous conditions and minimise the cost of the related debt.
Can you provide some examples of the reforms and investments carried out so far by Member States?
The Communication provides several of these examples in a dedicated box. They include, for instance, reforms to digitalise the public administration (Slovakia) and boost cybersecurity (Romania); licensing simplification reforms to boost the investments in offshore renewables or reforms to create the conditions for introducing renewable hydrogen (Greece, Portugal, Spain); reforms to support the roll-out of renewable energy and sustainable transport (Croatia, Romania); reforms tackling corruption and protecting whistle-blowers (Cyprus).
The examples included in the dedicated box also cover key steps of major investments to increase the competitiveness of firms operating in the tourism sector, including 4000 SMEs (Italy, EUR 1.9 billion) and to boost broadband infrastructure development (Latvia, EUR 4 million).
How can the RRF help to achieve a net-zero future?
The RRF has brought the green transition and support for the competitiveness of the clean tech sector to the centre of the EU’s post-pandemic recovery. The 27 national recovery and resilience plans have allocated EUR 203 billion for green measures, including transformative measures to facilitate the EU industry’s decarbonisation.
The REPowerEU Plan, introduced in May 2022 as the EU’s response to the global energy crisis, recognised the role of the RRF in achieving secure, affordable and green energy. Under this Plan, the RRF will support Member States in putting forward critical reforms and investments to rapidly phase-out the EU’s dependence on Russian fossil fuels and foster zero-carbon sources and energy resilience. These new or scaled-up measures, to be included in dedicated REPowerEU chapters, will come on top of the already ambitious green agenda put forward by Member States in the existing recovery and resilience plans.
Our Green Deal Industrial Plan, presented on 1 February, puts the RRF and REPowerEU at the centre of the Union’s response to the structural challenges affecting the competitiveness of the EU’s clean-tech sector. The RRF funds will be available to Member States to finance measures promoting the greening of industry, supporting EU net-zero industry projects, and assisting energy-intensive industries in the face of high energy prices.
To effectively sharpen Europe’s competitive edge for the net-zero age, REPowerEU considerably strengthened the RRF’s financial firepower. Now, Member States have accessto close to EUR 270 billion, with EUR 225 billion in remaining RRF loans, EUR 20 billion in new grants and up to EUR 23 billion in grant transfers from other EU funds.
How will you further increase transparency on the functioning of the RRF?
The accelerated implementation of the RRF goes hand in hand with a high level of transparency on the functioning of the Facility. Since the inception of the RRF, the Recovery and Resilience Scoreboard has served as a key transparency tool. It displays the contribution of the Facility under the six policy pillars, including granular data on common indicators and thematic analyses, while also providing real-time information on the disbursements. The RRF website contains the details of all 27 national plans as well as the detailed assessments of the satisfactory fulfilment of milestones and targets relating to the reforms and investments relevant for each payment request. In addition, to increase public awareness on the individual projects financed by the RRF, the Commission is preparing an interactive map to visually explore RRF measures that are being enacted in Member States.
The transparency of the RRF framework will be strengthenedfurther by the recently adopted REPowerEU Regulation, which will require Member States to publish information on the 100 largest final recipients of RRF funding for each national plan. This will further enhance transparency on the concrete use of RRF funds by providing an overview of the entities and individuals benefitting the most from RRF-funded measures.
How will stakeholders’ engagement evolve?
The RRF Regulation already foresaw public consultation requirements regarding the participation of stakeholders in the design of Member States’ recovery and resilience plans. These requirements have been further strengthened by the REPowerEU Regulation, which now demands that stakeholders, most notably local and regional authorities and social partners, are closely involved in the preparation of the REPowerEU chapters and remain key during the overall implementation of the plans.
When Member States request to revise their plans, they will have to submit to the Commission a summary of the consultation process, including information on the stakeholders consulted and a description of how their input was reflected in the design of REPowerEU measures.
The Commission will keep organising together with Member States joint Annual Events: a key communication moment bringing together institutions, stakeholders (in particular social partners and civil society actors) and beneficiaries of RRF support to discuss the progress and state of play of the national plan’s implementation. Overall, fostering joint ownership will further increase trust in the Facility, which is vital for a successful delivery of the reforms and investments included in the national recovery and resilience plans.
What are the principles underpinning the Commission’s assessment framework of milestones and targets?
The Commission’s assessment of the satisfactory fulfilment of milestones and targets is done in line with Article 24(3) of Regulation (EU) 2021/241 (‘the RRF Regulation’). The Commission has generally up to two months to assess, on a preliminary basis, whether the relevant milestones and targets have been satisfactorily fulfilled.
The Commission relies on the milestones and targets to determine the requirements that Member States must fulfil. It then establishes, based on the due justifications provided by the Member States, whether a specific milestone or target has been satisfactorily fulfilled. In a limited number of circumstances, minimal deviations linked to the amounts, formal requirements, timing or substance can be accepted.
Annex I to today’s Communication outlines in detail the framework applied by the Commission when assessing milestones and targets under the RRF Regulation.
How will the Commission determine the amount to be suspended in case of a partial payment?
The RRF Regulation caters to adverse and unexpected developments and allows partial or full suspensions of payments to address implementation shortcomings. Member States might be confronted with delays in the implementation of measures, affecting the timely fulfilment of some milestones and targets. These situations should be exceptional and corrected as soon as possible. They should not, where justified, prevent payments from being made for milestones and targets that have been fulfilled. The RRF Regulation caters for such a situation where implementation issues for one or more of the milestones or targets of a payment request cannot be addressed in time before the submission of a payment request.
The payment suspension procedure therefore favours the continued implementation of the plan and provides time for Member States to lift the suspension by fulfilling the relevant milestone(s) or target(s) within a period of six months. The Commission will determine the amount to be suspended if a milestone or target is not satisfactorily fulfilled, in full respect of the principles of equal treatment and proportionality.
Annex II to today’s Communication outlines the Commission’s methodology to underpin and justify its decisions as regards payments’ suspensions. It provides a clear and consistent approach to determine the relevant amounts, while retaining a margin of discretion, reflecting the fact that not all measures contribute equally to the realisation of the objectives of a national recovery and resilience plan.
It should be noted that a partial suspension is not possible in the case of a non-fulfilment of milestones or targets related to a Member State’s control system, which are necessary for the protection of the financial interests of the Union. Such a case always leads to the suspension of the full instalment and all future instalments, until the non-fulfilment is remedied.
Press release on the Communication marking two years of the Recovery and Resilience Facility
Recovery and Resilience Facility
Recovery and Resilience Scoreboard
Recovery and Resilience Facility Regulation
Question and Answers on the Recovery and Resilience Facility
Source: European Commission
