European Central Bank
Next Generation EU: a euro area perspective

NGEU and national recovery and resilience plans

The European Central Bank (ECB) asses the status of the Next Generation EU (NGEU), focusing on the national recovery and resilience plans (RRPs) presented already for all the EU countries, except the Netherlands, which are crucial to measure the NGEU’s effectiveness. The availability of the funds by countries is subject to the implementation of the plans. The ECB comments that, if the process is carried out successfully, it could boost a more permanent central fiscal capacity in the euro area in the longer run.

  • The Next Generation EU is Europe’s common policy response to the economic challenges raised by the coronavirus (COVID-19) pandemic, with a funding volume of up to €807 billion out of which €581 billion have been already requested by EU Member States.

  • Out of the seven NGEU programmes, the Recovery and Resilience Facility (RRF) is by far the largest, accounting for 90% of the total envelope: 50% of the RRF is made available in the form of non-repayable grants to Member States; the other half is made available in the form of loans. RRF funding imposes conditions to Member States regarding the implementation of national recovery and resilience plans (RRPs).

  • RRF economic impact: The RRF is expected to increase the share of public investment in the euro area GDP by about 2.5% until 2026; and to raise the level of euro area real GDP by around 0.5% in 2023.

- Risks to these estimates include the possibility of lower absorption rates than expected and allocation into less productive sectors.

  • The RRPs of euro area countries envisage more than 600 structural reforms:

- 39% related to the public sector.

- 24% renovating the green/digital framework. 

- 22% affecting the labour market, education and social policies.

  • According to the ECB, the reform mix is overall well suited to facilitate a swift and effective roll-out of RRP projects, something particularly important in view of the relatively weak track record of some countries in implementing reforms and absorbing EU structural funds effectively.

  • However, the ECB misses’ “classical” reforms aimed at the liberalisation of labour and product markets. Such reforms are important, since sound structural policies in these fields are widely considered to foster efficiency, potential growth, and economic resilience and warns that “hard” targets are relatively scarce, increasing the risk that some reforms will not be implemented effectively.

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