Recovery and Resilience facility will lead to lower usage of other EU Funds

Jorge Núñez Ferrer, Senior Research Fellow, and Tomás Ruiz de la Ossa, Research Assistant at the Centre for European Policy Studies (CEPS), analysed the implementation of the Recovery and Resilience facility (RRF) and their interaction with other European funds. In their view, there is a growing probability that the RRF will be prioritised to the detriment of other European funds such as cohesion and React-EU funds, among others, whose execution rate to date is going below expectations. Governments have to choose which funds to use due to their limited implementation capacity, which will result in final usage below the total available funds.

Main takeaways from the article:

• Member States have limited administrative capacity to execute funds and they won´t execute total funds available: The article analyzes the low level of implementation of cohesion funds by countries, both in the past and in the current program 2021-2027, which surprisingly is practically unused. It also analyzes the implementation of the React EU funds, whose access and financial conditions are more attractive for countries. Although their usage is extremely heterogeneous by countries, Spain and Italy (the countries benefited with the highest amounts of RRF funds) will be well below the average.
  
  
• Member states are focused on the implementation of RRF: The administrative burden to use EU Funds makes governments to prioritize the usage of RRF funds. Not only because is less onerous to spend than cohesion funds without national co-financing, but it is also in the political limelight. Regarding lower administrative burden, the article points out that an important difference was that the RRF was based on achieving milestones rather than ex-ante detailed project-based programming. However, the mistrust between Member States soon led to rigid ex-ante financial pre-allocation controls, which have delayed the approval of plans, slowed down deployment and reduced flexibility.
  
  
• Looking forward the article suggests that Member States need to increase flexibility of EU funds: Conditions to access funds should move away from rigid pre-allocation and the ‘specification’ principle that ringfences funding for programmes and projects. They should focus more on achieving milestones, which would represent a move towards a system which covers expenditures as reimbursements, as is partially the case for the RRF. In the future, a system that could be considered is the one that provides EU loans that can eventually transform into grants, but only if objectives are achieved.