Our analysis of the EU recovery package

Last week, the European Commission published its long awaited proposal for a recovery plan. According to the EU executive branch, this major plan is supposed to “repair and prepare for the next generation”. With this motto, they are setting quite high expectations and indeed, the figures are impressive: 1.8 trillion Euro!

The recovery money would result from the combination of the EU budget (1.1 trillion Euro) and money borrowed by the EU on capital markets to consitute the new recovery instrument “Next Generation EU” (750 million Euro). It is first time the European Union, via the European Commission, contracts debts for its Member States, to be repaid using the EU own resources (customs duties, value added tax and Gross National Income -based contributions).

A new EU Recovery and Resilience Facility is set to be the main instrument of the recovery. Member States will draw up recovery and resilience plans as part of their National Reform Programmes, in the framework of the European Semester. These plans should define the investment and reform priorities and the related investment packages to be financed under the facility. Another novelty is the REACT – EU Initiative, to increase cohesion fund-based support to Member States and make their economies more resilient and sustainable in the recovery phase. This will help them bridge the gap between first response and longer-term measures.

Additional resources are proposed for already existing funds in key areas such as the energy transition (Just Transition Fund), agriculture (European Agricultural Fund), research (Horizon Europe), private investment (InvestEU) and transport (Connecting Europe Facility).

We believe that the package of measures would make considerable funds available to municipalities, to increase local resilience and fight climate change. Nevertheless, based on our first analysis of the available documents, the governance aspect of the plan seems week: big figures can only have a big impact if the real actors of the economy are involved.

Overall, while the proposals of the European Commission are a step forward in terms of solidarity between Member States, they are also a step backwards in terms of strategic thinking. We see a lot of “business as usual” and not enough focus on resilience and regeneration of our territories. We are also concerned about democratic accountability, as the proposals set up a solely bilateral negotiation process between the Commission and Member States, thereby effectively bypassing the European Parliament.

Do you want to know more? Read our analysis of the measures here.