EU recovery package

Written by Magdalena Sapała.

Updated on 22 November 2022.

If you are you looking for a comprehensive source of information, analysis and infographics explaining the recovery package for Europe, you are in the right place. This blog post will lead you through a collection of EPRS publications, financial data, legal acts and other interesting sources of information and analysis on the topic.

Content:

Section 1 – What is the recovery package for Europe and how is it implemented?

Section 2 – How is the Recovery and Resilience Facility (RRF) implemented?

Section 3 – Relevant EPRS publications

Section 4 – Other interesting sources of information

(1) What is the recovery package for Europe?

In December 2020, the European Union (EU) agreed the recovery package for Europe: the seven-year budget, known as the 2021‑2027 multiannual financial framework (MFF), and a special instrument aiming at helping the EU economy to recover in the aftermath of the Covid‑19 crisis – the European Recovery Instrument ‘Next Generation EU’ (Figure 1). While the MFF ensures financial means for the functioning of the European Union, for the investments and implementation of various EU policies, Next Generation EU provides an extraordinary, temporary instrument, created to address the exceptional consequences of and challenges posed by the Covid‑19 pandemic.

Both elements of the financial package differ in their sources of financing. The MFF is financed from the EU’s own resources. Most of these (70 %) comes from direct payments from the Member States’ national budgets, calculated on the basis of gross national income (GNI). The rest comes from customs duties, contributions based on value added tax (VAT) collected by the Member States, and since 2021, from a national contribution based on non-recycled plastic packaging waste. The Next Generation EU recovery instrument, however, is financed from money borrowed by the Commission on behalf of the EU on the international capital markets (the first borrowing operations began in June 2021). Then, by 2058 at the latest, Next Generation EU should be repaid from the EU’s own resources. The EU budget will repay the grants and their borrowing costs, while the Member States that have taken loans will be responsible for their repayment. To help repay the borrowing, new sources of revenue for the EU should be in place by that time.

In December 2020, the approval of the 2021-2027 MFF and Next Generation EU, followed by the completion of the ratification process of the own resources decision in May 2021, opened the way for the implementation of the recovery package for the EU.

The MFF (€1 210.9 billion in current prices) covers the years 2021 to 2027, and is implemented through more than 40 programmes and funds under seven main EU spending priorities, known as headings (for details about the agreement on the 2021‑2027 MFF see the EPRS blog and an animated infographic).

Under the Next Generation EU (€806.9 billion in current prices), the legal commitments on spending have to be made during 2021‑2023, whereas the payments can be made until the end of 2026. Each year the amount to be used under the instrument will be entered to the EU budget as an external assigned revenue.

The Next Generation EU is implemented through seven programmes. The bulk of the instrument (90 %) was allocated to the Recovery and Resilience Facility (RRF), and the remaining 10 % to the programmes co-financed under the 2021‑2027 MFF, i.e. regional development (React-EU), rural development, Horizon Europe, the Just Transition Fund, Union Civil Protection Mechanism (RescEU), and InvestEU. In other words, except from the RRF entirely financed under the Next Generation EU, these programmes will be partly financed and implemented under the MFF and partly under NGEU. The proportions of both components vary by programme. While the NGEU share in the total allocation on Horizon Europe is 6 %, it is 56 % in the JTF.

Most of the Next Generation EU resources have been pre-allocated to the Member States. Spending under the Horizon Europe, RescEU and Invest EU programmes will be distributed to different projects across the EU on a competitive basis.

(2) How is the Recovery and Resilience Facility (RRF) implemented?

The Recovery and Resilience Facility (RRF) is the main building block of Next Generation EU. Its budget amounts to €723.8 billion (current prices) and is divided between non-repayable grants (€338 billion) and loans (€385.8 billion). The Member States’ maximum indicative financial envelopes under the RRF were decided in the RRF regulation (Annex I‑IV) and pre-allocated. However, the actual amounts to be transferred to individual Member State and the calendar of payments depend on the content of the national recovery and resilience plans (NRRP). Any Member State wishing to use the RRF had to submit such plan, outlining the national reform and investment package, and referring to the areas of European priority (specified under the six pillars), and to the challenges identified in the European Semester Country Specific Recommendations (CSRs).

The positive assessment of the NRRP by the Commission, and approval by Council (implementing decision adopted by qualified majority), are the key preconditions for the transfers from the RRF. Only once these are in place can the Commission conclude an operational agreement and financial agreement with each Member State. The RRF embeds a performance-based system where payments are made when Member States achieve agreed steps towards the reforms and investments envisaged in their NRRPs. Progress in the implementation is measured against a set of milestones (qualitative achievements) and targets (quantitative achievements).

Explore the progress of the RRF implementation in:

• EPRS animated infographic
• EPRS series of briefings ‘National recovery and resilience plans: How Member States are doing?’

Learn about the European Parliament role in the scrutiny of the RRF:

• https://www.europarl.europa.eu/recovery-and-resilience-facility/en/home

(3) Relevant EPRS publications:

• A. D’Alfonso et al., Economic and Budgetary Outlook for the EU in 2022.
• M. Sapała, Gender equality in the Recovery and Resilience Facility (October 2022)
• A. D’Alfonso, Energy policy in the national recovery and resilience plans (October 2022)
• M. Pape, Transport trends in national recovery and resilience plans (October 2021)
• V. Lilyanova, The digital dimension of the national recovery and resilience plans (July 2021)
• M. Sapala, N. Thomassen, Recovery plan for Europe – State of play (September 2021)
• M. Sapala, N. Thomassen, Recovery plan for Europe – state of play (June 2021)
• A. D’Alfonso et al: Economic and Budgetary Outlook for the European Union 2021 (January 2021)
• A. D’Alfonso, Next Generation EU: A European instrument to counter the impact of the coronavirus pandemic (July 2020)
• A. D’Alfonso, National ratification of the Own Resources Decision (June 2021)
• M. Karaboytcheva, Recovery and Resilience Facility (March 2021)
• A. D’Alfonso, InvestEU programme
• A. Wilson, Horizon Europe
• A. Widuto, Just Transition Fund
• V. Margaras, Exceptional coronavirus support measures of benefit to EU regions

(4) Other interesting sources of information

• Council regulation 2020/2094 establishing a European Union Recovery Instrument Next Generation EU
• Regulation (EU) 2021/241 establishing Recovery and Resilience Facility
• European Commission, Recovery and Resilience Scoreboard
• European Commission website on Recovery and Resilience Facility
• Council of the EU website on the recovery plan for Europe
• European Commission expert group on the RRF
• EUROSTAT European statistical recovery dashboard – Eurostat user-friendly presentation of 23 indicators for monitoring the recovery (updated monthly)
• Recovery and Resilience Dialogue with the European Commission, In-depth Analysis, Economic Governance Support Unit, European Parliament.
• Recovery and Resilience plans: public documents and overview of process, Economic Governance Support Unit, European Parliament

 Useful links to Member States’ national recovery and resilience plans

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