Reassurance needed to accompany Recovery and Resilience

Editor’s Blog: Produced in collaboration with the EU Buzz team 

Europe’s current buzz words are “recovery” and “resilience” – two words now synonymous with the pandemic. The European Commission has developed a Recovery and Resilience Facility (RRF) for its 27 Member States and has called on them to prepare their submission for financing – funding which will directly support their exit from the health crisis. 

The Facility is a substantial amount – €672.5 billion – to support investments and reforms – €312.5 billion in grants and €360 billion in loans. The financial allocations to Member States are complex but mainly based on a nation’s population, the inverse of its GDP per capita and the average unemployment rate over the past 5 years (2015-2019) compared to the EU average. The observed loss in real GDP over 2020 and the observed cumulative loss in real GDP over the period 2020-2021 are also factors that will be considered. 

Member States are now hurriedly preparing “recovery and resilience” proposals that outline a package of reforms and investment initiatives to be implemented up to 2026 to bring the countries out of the economic and social crises imposed on them by the Covid-19 virus. If they are quick off the mark, which means they should already have submitted their plans before the 30th April, the first financing could be delivered by July this year. 

The Commission will assess the proposal of each Member State ahead of European Council approval. Eleven criteria  are used by the Commission in its assessment to ensure that the measures will have a lasting impact and be specific to the challenges identified in that country. The proposal must have clear and realistic milestones and targets which allow for the monitoring of the progress towards the reforms and investments. Additionally, each country must meet the 37% climate expenditure target and the 20% digital expenditure target within its obligations. 

The Commission will then translate the contents of the national proposals into legally binding acts, including the proposal for a Council Implementing Decision, a Staff Working Document and operational documentation. This total process will have to be done for all 27 Member States individually. 

The Commission is certainly keeping itself in work! 

The European Parliament can request an update from the Commission every two months but there is no role foreseen for civil society to be consulted on these national issues which are supposed to directly benefit citizens. 

Significant concerns have already been raised regarding certain Member States, their adherence to the principle of Rule of Law, and overall financial integrity. The Commission states that “Member States’ national control systems will serve as the first instrument for safeguarding the financial interests of the Union. Member States have to ensure compliance with Union and national laws, including the effective prevention, detection and correction of conflict of interests, corruption and fraud, and avoidance of double funding.” But, when some states have not only objected to having the Rule of Law tied to the RFF, but have even challenged it in the European Court of Justice, what assurances will be provided by the Commission that European funds are being transparently disbursed and used for the purpose intended? This remains an unanswered concern, even for the European Parliament. 

The RRF Regulation envisages a time period of two months for the assessment of the recovery and resilience plans and for the translation of the contents into legally binding acts. If required, this can be extended on the agreement of both parties. Following its assessment of each recovery and resilience plan, the Commission will then adopt a proposal for a Council Implementing Decision. The Council then has four weeks to adopt the Commission’s proposal.

Once the Council has adopted the Commission’s proposal, the Commission will conclude the financing agreement and then make a 13% pre-financing payment. Further payments are thereafter performance related. The Commission will authorise disbursements only after the satisfactory fulfilment of key targets, reflecting progress on reforms and investments. If the Commission assesses that not all the milestones and targets associated with an instalment are satisfactorily met, the Commission can make a partial payment only.

For each payment request, Member States will provide  a ‘management declaration’ that the funds were used for their intended purpose, that information provided is correct, and that the control systems are in place and funds were used in accordance with applicable rules.

The Commission is insisting that it will implement its own risk-based control tools, including spot checks on a horizontal or risk-based approach. Should it identify “serious irregularities (namely fraud, conflict of interest, corruption), double funding or a serious breach of obligations”  the Commission will recover a proportionate amount and/or, to the extent applicable, request an early repayment of the entire, or part, of the loan support. 

With billions of euros at stake, this is not a reassuring statement from the Commission.  

European citizens are in desperate need of support from their national governments but, at the same time, they cannot afford any tax increases due to poor governance of the EU institutions tasked with protecting EU funds – further reassurance is required from the Commission on its Recovery and Resilience Facility.

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