‘Make sure RRF is well spent, because there will be no second chance’
Interview with Siegfried Mureşan, Member of the European Parliament
It takes three to tango. At least, that is the case for EU legislation, which is proposed by the Commission and approved by the European Parliament and the Council. Hence the term trilogue to refer to the talks held between the three institutions before they come to an agreement. The regulation establishing the Recovery and Resilience Facility (RRF), which entered into force on 19 February 2021, was no exception. One of the four Parliament rapporteurs was Siegfried Mureşan, Member of the European Parliament (MEP), who was also one of his institution’s three rapporteurs for the first report on the implementation of the Recovery and Resilience Facility, adopted in June 2022. He explains the Parliament’s role in the RRF legislative process, focusing in particular on the significant changes it was able to introduce. He also shares his views and concerns on the further rollout of the RRF.
By Gaston Moonen
Parliament was able to change several RRF provisions…
When we speak with Siegfried Mureşan, the issue of energy shortages and how to address the EU’s energy needs is very topical. For Siegfried Mureşan this ties directly into the design of the Recovery and Resilience Facility (RRF). ‘The RRF is the largest package of economic support ever created by the EU. This is why it is essential that money is well spent, and why we, from the European level, have decided on very clear rules on how money can be spent, and which types of investment we can finance. But in the framework of these precise rules, we also allow for certain flexibility for Member States, simply because different Member States have different priorities.’ He explains that, while the COVID 19 crisis affected all Member States economically, the social consequences and challenges to medical systems varied from one country to the next. ‘The shortcomings of bottlenecks were different, and this is why we have designed a structure with six pillars. Six areas in which investments can be financed by the RRF, allowing for a certain degree of flexibility for Member States.’ That flexibility was tested on 24 February 2022. ‘At the beginning of this year, the unjustified and illegitimate invasion of the Russian armed forces into Ukraine took place, multiplying the challenges that Member States of the Union are facing. The scope of our report on the implementation of the RRF of last June was, firstly, to assess how the European Commission has evaluated the national recovery plans, because most of the plans received a positive recommendation from the Commission, then were approved by the Council and implementation started. So our first aim was to assess how the Commission has fulfilled its duties and assess the start of the implementation phase.’ He underlines that there was also a second objective. To reflect on if and how, in view of the war in Ukraine, the RRF can support the new challenges arising in Member States.’
Siegfried Mureşan recalls what the main motivation was behind setting up the RRF in the first place, and how the European Parliament managed to extend the instrument’s scope. ‘The European Commission said the money should go into helping those affected by the COVID 19 crisis and by its socioeconomic consequences. But also to improve our resilience, basically to make sure that never again in the future would a crisis like that occur and find us unprepared as COVID 19 had found us.’ He adds that the Commission essentially wanted to channel RRF funding in just two directions: greening and digitalisation. ‘We, as a Parliament, said priorities in Member States are more diverse than this. And we, as the European Parliament, came up with the structure of six pillars, six areas in which each investment should take place.’
He lists the six pillars. Firstly, the transition to a green economy, including energy efficiency, thus reducing pollution and CO2 emissions. Secondly, the digital transformation. Thirdly, economic cohesion to improve competitiveness and support industry, private investment and SMEs. As the fourth pillar, he mentions territorial and social cohesion to ensure support for the most vulnerable and soften discrepancies within and between regions. The fifth pillar relates to institutional resilience, health and medical capacity, and crisis preparedness. ‘And the sixth pillar is linked to youth. Primarily investment in the right skills for the new generation, enabling them to work in a more digital environment.’
He emphasises that this structure comprising six pillars — instead of the original two — was an important contribution by the Parliament. ‘And also the fact that we had advocated for an increase in pre financing. We convinced the Council and the Commission to increase the pre financing from 10 to 13 %. This may sound like a technical detail. But in
fact it is something which allowed Member States to receive a larger amount of money from the beginning.’ He explains that this eased the pressure on Member States’ public finances throughout 2021 and enabled them to launch projects and investments more quickly. ‘Through this change in pre financing levels Member States were able to have a
more decisive impact upon economic growth and employment levels.’
Siegfried Mureşan sees another key area in which the European Parliament’s input was instrumental. ‘We also advocated very strongly for control provisions. Just taking the EU budget and the RRF together, we can already conclude that, over the next years, the EU will spend more money than ever. And the more we spend, the more we need to make sure that money really reaches its intended beneficiaries. The more we spend, the better the control needs to be. This is why we made this a main priority for the Parliament.’ He lists some specific provisions. ‘Firstly, by making sure that the rule of law conditionality applies to the RRF as it applies to the multiannual financial framework for 2021–2027. Secondly, a strong role for the European Public Prosecutor’s Office, for the European Anti Fraud Office, and of course for the European Court of Auditors.’ Another aspect he finds very important relates to ensuring transparency when it comes to the level of final beneficiaries. ‘Very often we need to push the Member States here. They were not really allies of the European Parliament when it came to the role of the ECA, or to fundamentally increasing the transparency of the funds allocated from the RRF and the transparency relating to information on the final beneficiaries of EU funds.’
…but did not succeed in everything it wanted
Regarding this issue of information on final beneficiaries, Siegfried Mureşan explains that the Parliament did not get as far as it wanted. ‘We wanted a compulsory common database in which all Member States should fill in details of all final beneficiaries, but the Member States had opposed this throughout the negotiations. However, we managed to impose on the European Commission the creation of a common data mining system, a common database, and the Member States were invited to contribute to it. We now know that not all Member States are contributing to it, are filling in data, but the vast majority of Member States do so.’ In his view, although the Commission is trying its best, its hands are tied by the voluntary nature of the database. ‘Even governments which had some suspicions when it came to, for example, the use of EU funds in Hungary, were not ready to disclose their final beneficiaries in an effort to find out which are the final beneficiaries in the Member States and show where suspicions of fraud and corruption were perhaps greatest.’
Another point on which the Parliament did not achieve as much as it wanted was in assessing the consultation processes in Member States. Siegfried Mureşan explains that, with the RRF, a lot of money needs to be absorbed in a very short period of time. ‘All investments need to start by the end of 2023 and need to be concluded by the end of 2026. Time is short. So Member States will only be successful if there are joint efforts between the national, local and regional levels, between the private and the public sector. Furthermore, national recovery plans should not be a political instrument in the hands of governments, but should really be drafted and implemented in a wide, comprehensive manner with the participation of many stakeholders in each Member State.’
This is why many MEPs wanted a comprehensive range of stakeholders — including regional authorities, trade unions and private sector associations — to be involved in the drafting and implementation of national recovery plans. ‘In several Member States our evaluation was that the consultation with local and regional authorities was a mere formality. In Poland, for example, the regions proposed many excellent projects, fulfilling all legal requirements of the RRF, which were completely disregarded by the central government. This is exactly what we want to prevent.’ He stresses that it is important too that money reaches the beneficiaries who are in direst need. ‘Very often the local and regional levels know more. Who has been affected by COVID 19, which categories of people — by age, social categories, in which regions, which professional categories –need support? Which enterprises, which types of infrastructure need to be modernised, etc.’ He emphasises that involving local and regional authorities is not just a whim of the Parliament. ‘It is actually an additional guarantee to make sure that money really reaches the people in need. Parliament has been pushing for this, and we will continue to do so.’
Within the RRF framework, Member States are obliged both to consult regional and local authorities and to report back to the Commission. Siegfried Mureşan explains that the Commission was not allowed to assess these consultations because the Member States did not give their agreement when they adopted the RRF regulation. ‘Even though the Parliament wanted the European Commission to have the right to assess the involvement of the local and regional levels, and grade these consultations, the Council did not want this. We managed to obtain the obligation for the consultations to take place and for the Member States to send summaries to the Commission.’ Regrettably, however, the Parliament could not persuade the Council to permit the Commission also to evaluate how consultations took place. ‘And allow the Commission, if necessary, to ask a Member State to enlarge its consultation or better take on board the input received.’
ECA opinion helped justify the call for stronger controls
When discussing to what extent the ECA’s opinions — most recently on REPowerEU (opinion 04/2022) — helped the Parliament to take a position on the RRF, Siegfried Mureşan refers in particular to opinion 06/2020. ‘This opinion was very useful for us because it outlined some of the missing elements of the RRF and of the initial proposal. It helped the European Parliament in pushing for stronger control mechanisms and also for a stronger role of the ECA.’ In his view, it was very useful during the negotiations as a tool with which to advocate, giving the European Public Prosecutor’s Office, the EU’s Anti Fraud Office and the ECA a greater role in respect of the RRF. ‘In the initial proposal made by the European Commission, the auditing role of the ECA was not clearly defined. After the negotiations between the Parliament and the Council, we feel that the ECA’s role is now clearer. The ECA opinion was also important to raise awareness at the level of Parliament regarding the need for a strong control mechanism and what this should look like.’
First implementation report is generally positive but highlights need for more attention to reforms
Parliament’s first report on the implementation of the RRF contains several positive observations about the RRF’s impact on boosting GDP and mitigating some of the effects of the COVID 19 pandemic. However, the report also expresses some concerns and highlights a number of setbacks. For Siegfried Mureşan, one important setback relates to the RRF’s capacity to trigger and support new reforms. ‘We have deliberately allowed for the principle of greater retroactivity in applying the RRF, so the Member States can present project investments which were already in place at the beginning of the COVID 19 crisis, but which fulfil all of the requirements of the RRF Regulation.’ The idea behind retroactivity was to allow the financing of eligible relevant investments.
‘What happened was that Member States also retroactively put forward reforms. We believe that too many of the reforms were actually retroactive work from the past.’ He explains that the Commission accepted this for the first tranche of payments. ‘But the scope of the RRF is to incentivise new reforms. The Commission should not accept retroactive reforms anymore, because now the start of the COVID 19 crisis lies more than two years back. The Member States should proceed to new additional reforms, and target new investments. The fact that too many of the reforms were already from the past was a setback.’
He considers the reform component to be just as important as the investment component. ‘Too many people talk about the RRF only in terms of investments, or budgets. But the reform component is also very important. We have known for more than ten years what reforms Member States need. But the Commission did not have the tools to really incentivise these reforms, and Member States were implementing only a very small proportion of the country specific recommendations which the Commission presented every year in the context of the European Semester.’
For Siegfried Mureşan, the RRF is the most effective tool the Commission has ever had for making sure that Member States implement the necessary reforms. ‘Before, the Commission had hardly any tools. Now we can see that all of the national recovery and resilience plans contain reform components. As I said, unfortunately, some with retroactive reforms, but now there will be more current and future reforms.’
In his view, the rules do not allow the Commission to grant disbursement of the second tranche of payments unless the investment and reform calendar is adhered to. It is crucial, if reforms are not implemented, that the Commission can hold back amounts in proportion to the importance of the milestones and targets which were not met. ‘We feel this is an effective tool, and we as Parliament will scrutinise very precisely whether and how the Commission makes use of it’. He feels that the message to governments needs to be very clear. ‘All milestones and targets need to be met for all of the funds to flow to Member States. Any failure to meet milestones and targets will automatically lead to a reduction in disbursements, based on the importance of the milestone or target which was not reached.’
He identifies the labour market, and particularly youth employment and education, as essential areas of reform. ‘Flexible labour markets, relevant curricula, making sure that students learn in school what they need to find a job, are essential. Reform of the education system and labour markets are important to increase the employability of young people. And, of course, education needs investment, including in digitalisation and vocational training. This is something which the sixth pillar of the RRF allows for.’
Rule of law as condition sine qua non
For Siegfried Mureşan, reforms should include, if necessary, safeguards on respect for the rule of law. ‘What is key here is that, if EU money is flowing, European values need to be observed. It is essential that Member States make sure that RRF and EU budget funds are used in compliance with the legislation. That in Member States the rule of law functions and corruption is actively tracked. And that the reform of the judiciary, where needed, also goes ahead.’ He makes clear that all of this needs to happen in a given Member State before the Commission can disburse EU funds there. ‘What we expect is for the Commission to apply the item of legislation which was agreed by the co legislators — Council and Parliament — for both the EU budget and the RRF. We expect the Commission to apply legislation in an effective manner, without any further delays.’
He adds that the Parliament also expects the ECA to be an ally in regard to the rule of law. ‘We see the ECA as an ally in making sure that money is well spent, checking that money only flows if conditions are met, and whether the rule of law is in a way under attack. And, if fraud and irregularities are found, whether they are being tackled.’ For him, this includes the need for the ECA to assess accurately whether the conditions are in place for resources to flow, and what the situation is on the ground in terms of the quality of the spending of EU funds. ‘Any opinions, any recommendations from the ECA concerning how to identify potential threats to correct spending and the rule of law, would and will be very useful. Any facts that the ECA might give the European Parliament will encourage the Commission to apply the rule of law criterion.’
Looking beyond the rule of law, Siegfried Mureşan sees a substantial general role for public auditors in relation to the RRF, both in the EU and nationally. ‘Any budget which is not well spent by governments and local or regional levels in Member States is funding that will be missing somewhere else in that very same Member State. National auditors have a responsibility, have a role as well in making sure that the resources are well spent at national level.’ He believes that national SAIs should work together with EPPO, OLAF and the ECA to ensure that governments are properly spending the resources made available to them. ‘RRF resources are limited, because there will not be a second RRF, this instrument will not become permanent. It is the obligation of Member States to spend money in compliance with all of the rules, in compliance with the EU legislation, and also to work in such a spirit that money is being spent for those projects which have the biggest needs. So I see a strong role for national auditors as well, working in conjunction with the ECA.’
New EU own resources needed to cover RRF debt
Siegfried Mureşan is very conscious that the RRF’s uniqueness lies in the way it is financed, which has implications for the future when the underlying Commission bonds will need to be repaid. ‘We should be aware what the debt which the EU has run up over the past two years means. Never before has the EU entered into more debt than now, up to €750 billion. This is a significant amount.’
Another point he emphasises is that the manner in which this amount will be repaid needs to be fully clarified. It is clear to him that the loans component will be paid back by the Member States. ‘But, regarding the grants component, the Member States have made very clear that they will not pay this back, which is understandable because these are grants.’ He goes on: ‘And the EU budget is in no way in a position to repay the grants component. For the European Parliament, the own resources of the European Union are the only possible solution. And there, unfortunately, Council and Commission are not respecting the binding calendar agreed by the Council, Commission and Parliament before the implementation of the 2021–2027 multiannual financial framework. We see delays when it comes to the launch of own resources for this.’
He clarifies what he expects on this issue. ‘Firstly, we expect the calendar for the introduction of own resources to be respected. Secondly, as I said, the RRF has to remain a one time instrument for an exceptional crisis. It cannot be prolonged and it cannot become a permanent instrument. Simply because the EU does not have the revenue to ensure repayment. This risks endangering the proper financing of other priorities at the European level.’ The MEP considers both what he calls the old traditional priorities of the EU budget (cohesion and agriculture) and the new priorities (research, innovation, Erasmus, border control, security, defence) to be important. ‘They should not be jeopardised by the fact that the RRF cannot be paid for. We should be aware that there is increased debt now at EU level, which limits our capacity to act.’ He argues that this is why Member States have to make the most of this instrument now. ‘They need to make sure that RRF money is well spent, because there will be no second chance, and no extension. Simply because the EU has insufficient resources to fund another RRF.’
Aiming for an EU decision‑making process that is fit for the future
As an MEP, Siegfried Mureşan has been heavily involved in the discussions that have been held as part of the Conference on the Future of Europe, which gives citizens an opportunity to share how the EU can best meet their needs. When talking about this and other issues, starting with man made disasters such as the war in Ukraine, he observes that the challenges now seem to be increasingly diverse. ‘This is a natural process, and it’s clear that we need to equip the EU with new tools, with new instruments to provide solutions to the challenges people are facing.’
For him this means that, just as countries are constantly striving for greater performance, and businesses need to research, invest and innovate in order to stay competitive and relevant, so the EU too should be in a permanent state of reform and modernisation in order to find solutions to the new challenges facing EU citizens. ‘We have seen, particularly in the area of healthcare, that more could be done so that the EU can respond in times of crisis.’ Whenever there is a crisis in the EU, people expect solutions from the EU institutions. ‘Over the past 15 years, we have faced three major crises in the European Union. First, 12 to 13 years ago, the economic and financial crisis. Second, six to seven years ago, the migration and refugee crisis. And third, two years ago, COVID 19. None of these crises was generated in Europe, and none was generated by the institutions of the EU. But all three crises, imported into the EU, affected people — and people expected solutions from the institutions.’
Siegfried Mureşan concludes that, if it is to provide appropriate solutions, the EU clearly needs new tools. ‘We need to improve the functioning of the institutions so we have the capacity to react quicker. For example, by enlarging the qualified majority system for making decisions. Because, yes, unanimity is justified for fundamental questions, but it should remain the rule only for fundamental questions. For the rest, we should be able to decide with the qualified majority. Otherwise, any single Member State of the Union can hijack the Union.’ This is obviously not in the EU’s best interests. ‘That would only mean that we can only move forward at the speed of the slowest Member!’
For Siegfried Mureşan, making the EU future proof means also making the EU’s decision making process fit for the future by providing new tools, for example in the area of healthcare. ‘But also making sure that our economy stays strong and competitive. Because people rightly expect high social standards, high levels of income. However, for this to be possible we have to make sure that our economy stays competitive, which is only possible if we reform, if we invest in research and innovation, and if our goods are in demand on global markets.’ He explains that this was expressed clearly in one of the conclusions of the Conference, as the expectation of higher standards of living. Together with another conclusion: ‘The fact that this is only possible if the Union remains a Union based on innovation and competitiveness. The RRF instrument should help us realise this.’
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.
