Analysing the delivery of NGEU/RRF — EPRS efforts to contribute to monitoring and transparency
By Alessandro D’Alfonso, European Parliamentary Research Service
The European Parliamentary Research Service (EPRS) is looking at various aspects of the NextGenerationEU (NGEU) recovery instrument, and in particular the Recovery and Resilience Facility (RRF). This ranges from covering various policy areas under the six pillars of the RRF to its financing, and from the implementation of the respective Member States’ plans to the European outlook for recovery. Alessandro D’Alfonso, head of the NextGenerationEU Monitoring Service within the Members’ Research Service of the EPRS, outlines why transparency and monitoring are crucial for such a groundbreaking instrument, while presenting the EPRS’s contribution to meeting these objectives, and providing a flavour of the key elements that have emerged from the analysis so far.
The European Parliament’s focus on monitoring and oversight of the RRF
The NextGenerationEU (NGEU) recovery instrument and its Recovery and Resilience Facility (RRF), which the European Union created to boost the recovery from the pandemic across its Member States, are major innovations in EU finances, not least because of the unprecedented level of borrowing of resources¹. The common aim of NGEU and the RRF is to focus their resources on investments and reforms, such as those relating to green and digital objectives, which are instrumental to making European economies and societies more resilient.
Progress on the implementation of the NGEU’s RRF component needs to be closely and continuously monitored. This is because of the scale of the new investment — for example, NGEU almost doubles the EU’s commitment appropriations in certain financial years — and because of the heavy focus on nationally generated projects that are outside the traditional methods of EU financial control.
The European Parliament, which was a strong advocate for the creation of a common recovery instrument, has repeatedly stressed the importance of appropriate monitoring². Parliament has a crucial role in the scrutiny and oversight of the RRF implementation. In addition to its resolutions and plenary debates, Parliament voices its views on various aspects of RRF implementation through a range of channels, including those established by the RRF Regulation and the interinstitutional agreement on budgetary matters.
Channels for information transmission and the regular exchange of views include interinstitutional meetings on NGEU implementation and a recovery and resilience dialogue with the Commission, held in the joint Budgets (BUDG) and Economic and Monetary Affairs (ECON) committee, which are the lead committees on the topic. In addition, Parliament has established a standing working group on the scrutiny of the RRF, which has so far held 26 meetings with the European Commission.
Against this background, the European Parliament has repeatedly underlined that transparency is essential for strong monitoring and the successful implementation of the national recovery and resilience plans (NRRPs) through which Member States invest their RRF allocations. The European Parliament’s Recovery and Resilience Facility webhub provides an overview of the way in which the European Parliament oversees the RRF.
Insight through the EPRS briefing series
As a contribution to the objective of ensuring the NRRPs’ transparency and visibility, the European Parliamentary Research Service (EPRS) established a series of briefings entitled ‘NextGenerationEU delivery — How are the Member States doing?’. The series aims to provide a clear, accessible and informative overview of what are essentially complex plans, usually running to many hundreds of pages. Each briefing is devoted to one single NRRP, and in just twelve pages the briefing sets out its main features, the challenges and recommendations it seeks to address, the state of play in terms of its implementation, and provides a flavour of the debate it has triggered at national level and beyond. The briefings are complemented by an interactive infographic, which allows the easy comparison of key data for all Member States (see Figure 1).
Figure 1 — Snapshot of the EPRS interactive infographic for the RRF
Various visuals in each briefing (see Figure 2) help to capture snapshots of key data, such as the breakdown of measures and resources by area of intervention, the main implementation steps, and the envisaged instalment schedule. Each briefing is available in English and in the official language(s) of the Member State covered, which facilitates their use by Members of the European Parliament (MEPs) in their constituencies, and by European Parliament Liaison Offices (EPLOs) in the Member States.
Figure 2 — Example of one visual shown in the September 2022 briefing on Spain
One year on since its launch, the series has triggered interest and appreciation both within and outside the European Parliament. In September 2022, it covered all 25 NRRPs that had been approved thus far. The completion of the first set of briefings led to a new phase in our analytical work on NextGenerationEU, since each publication will be regularly updated at key stages throughout the lifecycle of the relevant national plan. At the same time, this is a good opportunity to take stock of some elements that have emerged so far, both arising from our analysis and from the work of others. Without aspiring to be exhaustive, given the breadth of the plans, I would like to highlight five points relating to:
- diversity;
- cross‑border aspects;
- cost estimates;
- relevance; and
- timely implementation.
United in diversity
The EU’s motto, ‘United in diversity’ fits well with the NRRPs. The RRF sets common objectives to be addressed in six areas of European interest, but is flexible enough to enable Member States to tailor‑make their plans to their own specific needs in each area. The Commission expects all approved plans to exceed the compulsory climate and digital targets (at least 37 % and 20 % of the national allocation respectively), but the sectoral focus may differ significantly from one Member State to another. For example, 47.4 % of Bulgaria’s investments relate to energy, Estonia has decided to devote around one third of its plan to strengthening its health system, while both Austria and Germany have allocated more than half of their resources to the digital transformation through a wide range of measures, including enhanced connectivity and the promotion of digital skills.
In addition, the level of variety in the plans goes beyond their content and can be observed in other features such as the envisaged disbursement calendar — which can have an impact on the reporting workload — and the milestones and targets to be met. Many Member States (e.g. Belgium, Italy and Slovenia) have scheduled ten instalments but others (e.g. France, Germany and Ireland) have scheduled only five, with a range of intermediary options (e.g. Estonia, Malta and Spain). As noted by the European Court of Auditors in its special report 21/2022 regarding the Commission’s assessment of national recovery and resilience plans, a harmonised approach has not been used to set milestones and targets. The plans’ diversity can help respond to different country recommendations, but challenges may emerge in terms of monitoring and comparability.
Cross border in impact, but only to a certain extent in projects
According to various economic analyses, including by the European Central Bank³ and the European Commission⁴, NGEU and the RRF have positive spillover effects. This means that each Member State not only benefits directly from its own NRRP, but also indirectly from RRF investments (and reforms) in other Member States. Spillover effects are expected to be particularly important in small and open economies. At the same time, the Commission sought to encourage the development of multi‑country projects for common challenges that require coordinated investment and reforms. However, overall, Member States appear to devote a relatively limited share of their allocations to such projects.
The European Parliament was disappointed that the NRRPs did not include a higher number of cross‑border projects, noting in particular their importance with regard to energy transmission across Member States. However, in its opinion 04/2022, the European Court of Auditors concluded that the recent Commission proposal for REPowerEU chapters in the NRRPs ‘does not include any specific action to incentivise such projects’. In addition, the proposed financing for REPowerEU, mainly through loans, could adversely affect the development of further multi‑country projects.
The question of costings
Unlike other EU instruments, the RRF does not link disbursements to the verification of costs incurred, but rather to the achievement of milestones and targets. The Commission has given all the approved plans a B‑rating (reasonable to medium extent) for the assessment criterion that looks at the total cost estimates underpinning the plan. Various reasons lie behind this rating, not least that a number of investments are innovative and cost estimates cannot be based on past experience. The complexity of costing carries with it a number of implications, including the fact that it is not always easy to identify the breakdown of cost estimates for individual measures based on publicly available information.
In June 2022, the European Parliament reiterated its regret that the Council had rejected the creation of an online platform on which final beneficiaries would feature, calling on the Commission and the Member States to periodically publish up to date data on final beneficiaries and transferred funds, in the interest of public trust and transparency. The Commission was asked to ensure that costs are plausible and that a proper cost analysis is conducted in order to tackle potential fraud and corruption⁵.
In addition, cost analysis may prove useful for monitoring the plans’ actual contribution to the climate and digital spending targets, since the current figures for these targets are calculated on the basis of the cost estimates. In the same resolution, Parliament called on the Commission to assess whether the green and digital spending targets are likely to be reached as planned during the implementation phase of the RRF, and simultaneously called on the Member States to take appropriate remedial measures where they anticipate that these targets risk being missed.
Continued relevance
Economic data show that, thanks to rapid and resolute responses at Member State and EU level, the economic impact of the pandemic was less severe than initially forecast. NGEU and the RRF were important components of these responses. The economy seemed to be on the way to recovery at least until early 2022, but forecasts have now worsened in the wake of new challenges, both external (such as Russia’s war in Ukraine) and internal (such as inflation).
Two features ensure that NGEU and the RRF remain relevant and crucial against an evolving backdrop. On the one hand, their link to the country‑specific recommendations under the European Semester has resulted in the plans being geared towards measures that should address structural challenges, with a view to making EU economies and societies more resilient. On the other, the RRF has started to make its positive contribution felt, with less than one quarter of the approved allocations having been disbursed so far. This means that the bulk of the resources and of the related benefits is yet to come, provided that the plans for implementation are carried through.
Timely implementation is of the essence
All of the RRF measures must be completed by 2026. Given the ambitious scope of the plans and the level of resources still to be disbursed, this poses a challenge in terms of the absorption of the RRF resources at national level, when looking at the Member States’ track record with other EU budgetary instruments. In order to reap the plans’ full potential, it will be crucial to prevent delays from building up. Underlining that the benefits of reforms go beyond their associated costs, Parliament’s resolution of 23 June 2022 noted that public administration modernisation features prominently in many of the NRRPs, stressing that the plans themselves could contribute to increasing the capacity of public administrations to manage EU resources effectively at national, regional and local levels.
NGEU/RRF progress covered in various EPRS publications
These five points provide just a flavour of the analysis so far, but the EPRS’s work on NextGenerationEU goes beyond the series on the NRRPs, which is part of a broader project on ‘Analysing delivery of NGEU’. The latest development is the launch of the first version of the above‑mentioned interactive infographic on the EU recovery instrument, which will be enriched over time as implementation of the plans advances. This follows the inclusion of a dedicated NGEU chapter in the flagship annual EPRS economic and budgetary outlook, the production of six‑monthly infographics to monitor progress in terms of the European economy’s recovery, and the launch of briefings on sectoral aspects of the NRRPs such as those on their digital, energy, gender and transport dimensions.
The small and committed Next Generation EU Monitoring Service is responsible for the ‘Analysing delivery of NGEU’ project. However, these publications and deliverables are a collective endeavour involving many colleagues across the EPRS, without whom all of this would simply not be possible. I would like to thank each and every one of them for their crucial contributions to our publications so far, and for the work to come. Our service will continue to contribute to the Parliament’s goal, namely monitoring and providing transparency relating to the innovative initiatives that the NGEU and the RRF represent, with regular publications on their implementation. Transparency is indispensable to ensure a better understanding of these instruments.
¹ D’Alfonso A., Next Generation EU: A European instrument to counter the impact of the coronavirus pandemic, EPRS, July 2020; D’Alfonso A. et al., Economic and Budgetary Outlook for the European Union 2022, EPRS, January 2022.
² European Parliament resolution of 20 May 2021 on the right of information of the Parliament regarding the ongoing assessment of the national recovery and resilience plans.
³ Bańkowski K. et al., The economic impact of Next Generation EU: a euro area perspective, Occasional Paper Series No 291, European Central Bank, April 2022.
⁴ Pfeiffer, P., Varga, J. and in ’t Veld, J., Quantifying Spillovers of Next Generation EU Investment, European Economy Discussion Papers, No 144, European Commission, July 2021.
⁵ European Parliament resolution of 10 June 2021 on the views of Parliament on the ongoing assessment by the Commission and the Council of the national recovery and resilience plans.
This article was first published on the 2/2022 issue of the ECA Journal. The contents of the interviews and the articles are the sole responsibility of the interviewees and authors and do not necessarily reflect the opinion of the European Court of Auditors.
