What is the Recovery and Resilience Facility?
The new Recovery and Resilience Facility will provide large-scale financial support to reforms and investments undertaken by Member States, with the aims of mitigating the economic and social impact of the coronavirus pandemic and of making the EU economies more sustainable, resilient and better prepared for the challenges posed by the green and digital transitions.
It will help Member States to address the challenges identified in the European Semester, in areas such ascompetitiveness, productivity, environmental sustainability, education and skills, health, employment, and economic, social and territorial cohesion. It will also ensure adequate focus of these investments and reforms based on the green and digital transitions, to help create jobs and sustainable growth and make the Union more resilient.
How much money will it make available?
Most of the funding will be provided through grants, with possible top-ups via loans. The total amount of grants available will be €310 billion (in constant prices; 335 billion in current prices), while an additional €250 billion in loans (in constant prices; 268 billion in current prices).
Regarding grants, a maximum amount per Member State will be determined based on a pre-defined allocation key, which takes into account population, GDP per capita and unemployment. The key will be particularly beneficial to the countries most affected by the crisis, notably those with low per capita income and high unemployment.
In addition to grants, Member States may request a loan for implementing their reforms and public investments. Loans need to be justified by the higher financial needs linked to the recovery and resilience plans put forward by Member States. The maximum volume of loans for each Member State will not exceed 4.7% of its Gross National Income. However, an increase will be possible in exceptional circumstances subject to available resources.
What types of reforms and investment will the Facility finance?
To access the facility, Member States should prepare recovery and resilience plans setting out their reform and investment agendas for the subsequent four years, until 2024. These plans should comprise both reforms and public investment projects through a coherent package.
The plans should set out reforms and investments for addressing the challenges identified in the context of the European Semester, in particular those related to the green and digital transitions. They should, among others, explain how they contribute to strengthening the growth potential, resilience and cohesion of the Member State concerned. The grants and loans will be disbursed in instalments upon completion of milestones and targets as defined by Member States in their recovery and resilience plans.
How will this Facility be integrated into the European Semester and in line with the Energy Union?
The plans are presented by Member States and should be consistent with the challenges and priorities identified in the European Semester, with the national reform programmes, the national energy and climate plans, the just transition plans, and the partnership agreements and operational programmes adopted under the Union funds. Furthermore, the plans will constitute an annex to the respective National Reform Programme. Member States will report on their progress in implementing the plans in the context of the European Semester.
What is the value added of a loan in addition to a grant?
Loans will complement the grants and will provide additional financing for Member States that have higher financing needs due to more significant reforms and investments to be undertaken. The loan will finance additional reforms and investments beyond those that already benefit from the grant. The loans will benefit from the long maturities and favourable interest rates that the Union enjoys. They will therefore be of particular interest and benefit to Member States that face higher borrowing costs.
How will decisions be taken?
Member States will submit recovery and resilience plans to the Commission; they can do so each year until 2022 at the latest by 30 April of each year, but they could already submit a first draft together with their national draft budget in October. To provide support as quickly as possible, Member States will be encouraged to submit their first plan already this year.
The Commission will assess the plans on the basis of transparent criteria. The plans must effectively address the relevant challenges identified in the European Semester, whether they contribute to strengthening the growth potential and resilience of the Member State and to enhancing cohesion; and must contain measures that significantly contribute to addressing the green and the digital transitions to a large extent. Measures supported should avoid adverse impacts in climate and the environment.
Provided that the assessment criteria are satisfactorily fulfilled, the Commission will adopt a decision setting out the financial contribution that the Member State will benefit from (grant and, if so requested, loan), and the milestones and targets.
To inform the preparation and the implementation of Member States’ recovery and resilience plans, the Council will also have the opportunity to discuss, in the context of the European Semester, the state of recovery, resilience and adjustment capacity in the Union, based on Commission documents available.
The adopted plans will be communicated to both the European Parliament and the Council. The Commission will also report annually on the progress on the implementations of the plans by the Member States and on the spending under the Facility to both institutions.
How does the Facility relate to other support initiatives such as REACT-EU, cohesion policy programmes and SURE?
The Facility and REACT-EU are complementary.
REACT-EU will target crisis repair actions in the shorter-term related to labour markets, healthcare and SMEs (liquidity and solvency support), and essential investments for the green and digital transitions. It will provide immediate and direct support to Member States’ economies.
The Recovery and Resilience Facility will support longer-term reform and investments, notably in green and digital technologies, with lasting impact on the productivity and resilience of the economy of the Union.
The Facility is also complementary to the range of measures already developed in response to the current coronavirus pandemic such as amendment to the cohesion policy regulation, the Coronavirus Response Investment Initiatives and SURE.
What will happen with the Reform Support Programme?
The Facility builds on progress on the Reform Delivery Tool included in the Commission’s 2018 proposal for a Reform Support Programmewhile adapting to the new economic situation, affecting all EU Member States, and financing method. The Reform Support Programme is withdrawn and its content replaced by the Recovery and Resilience Facility and a Technical Support Instrument, in two standalone regulations.
What is the Technical Support Instrument?
The Technical Support Instrument is the continuation of the existing Structural Reform Support Programme (SRSP), and builds on its success, allowing the Commission to help strengthen the administrative capacity of the EU Member States. The Technical Support Instrument will provide support to the Member States’ efforts to implement reforms necessary to achieve an economic and social recovery, resilience and convergence. The instrument allows to support Member State authorities in their efforts to design reforms according to their own priorities and enhance their capacity to develop and implement reform policies and strategies, as well as to benefit from good practices and examples of peers. Technical support will be particularly needed in the aftermath of the crisis.
*Source: European Commission
By: N. Peter Kramer
