Have the article read by OpenAI (Beta). Please note that AI translations may take some time to process.Money from a flagship fund to support the European Union’s economic recovery in the wake of the COVID-19 pandemic is at risk of not reaching EU countries fast enough, the Luxembourg-based European Court of Auditors (ECA) warned on Monday.
Halfway through the COVID-19 relief fund’s lifespan, “EU countries had drawn down less than a third of the planned funds”, Ivana Maletić, a lead auditor of the review, warned in a statement.
The EU’s top budget and policy watchdog said the slow speed is jeopardising the fund’s objectives. She highlighted the “risks of funding absorption slowing further and projects not being completed”.
The European Court of Auditors (ECA) blamed inflation and material shortages linked to the war in Ukraine, planning delays for large infrastructure projects, national bureaucracy like public procurement rules, and changes of government for the delays in using the funds.
The ECA is responsible for keeping an eye on – and improving – the EU’s financial management by checking that funds are collected and utilised accordingly.
What is the recovery fund and how can countries access it?
The EU’s Recovery and Resilience Facility (RRF), worth 724 billion Euro originally, launched in February 2021 and runs until August 2026, is the main component of the NextGenerationEU instrument designed to aid member states after the pandemic.
The bloc agreed on the unprecedented mechanism in July 2020 after bitter negotiations in the face of opposition from frugal countries led by The Netherlands.
The countries, mainly in northern Europe, feared having to foot the bill for higher spending in their southern neighbours. Italy and Spain are some of the main beneficiaries of the funds.
By the end of 2023, the European Commission, which is responsible for managing the funds, had only transferred 213 billion Euro to member states.
To finance the RRF, the Commission borrows on capital markets and makes the funds available to member states to finance projects as well as environmental and digital reforms subject to conditions.
The EU countries receive part of the money as grants that do not have to be repaid, and the rest as loans. This is the first time that debts have been jointly incurred on a large scale in the EU. The debts are to be settled by the end of 2058 at the latest.
In order to receive the aid, member states must submit a plan with specific investment and reform projects – their national Recovery and Resilience Plans (RRPs). The funds are performance-based and only to be paid once agreed milestones and targets for the implementation of the planned reforms and investments have been achieved.
According to the ECA, almost all countries had submitted their payment applications to the commission with delays. The reasons for this were often uncertainties regarding environmental regulations and insufficient administrative capacity. The time required to implement measures was also underestimated.
The new ECA audit found that while the rate of payments from the Commission is progressing, EU countries may not be able to “absorb the funds in time” for their public projects before the fund expires in 2026.
In addition to the risk that some of the money will not be utilised in the end, there is also the risk that the Commission will transfer a lot of money to the EU countries without the promised projects and reforms being implemented in the end.
This is due to the fact that a member state does not only receive money when a project is completed, but also when certain interim targets are reached. The EU executive has no legal means of reclaiming this part of the funds if the country does not complete the project or does not finalise the project by August 2026, the ECA warns in its report.
What is the situation in member states?
By the end of last year, EU countries “made less than 30 % progress towards reaching their pre-defined milestones and targets” according to the auditors.
The total number of milestones and targets stands at 2159 of which 679 had been satisfactorily fulfilled at the end of 2023, according to the report.
Auditors also found that half of the funds disbursed to 15 EU member states did not reach the final recipients of the public money and that seven EU countries did not “provide complete and consistent information on the current location of these funds.”
The ECA warns of the risk that applications for European money from the recovery fund will be further delayed and projects will not be completed on time. As a result, member states ‘cannot enjoy the expected economic and social benefits’, the Court says.
While 16 member states plan to complete targets and milestones relating to at least 30 percent of their investments in 2026 only, Italy plans to finalise 62 percent of planned investments by 2026. The country had fulfilled 178 out of 525 milestones and targets by the end of 2023, including for example increasing the administrative capacity of local authorities, having applied to 46 percent of the funding available to the country.
By the end of 2023, Austria had only applied for 23 percent of the funds earmarked for the country and had only fulfilled 44 of the 171 milestones and targets. Austria had received a tranche totalling 700 million Euro until the end of 2023. Over the entire term, the country is entitled to around 3.5 billion Euro.
The Netherlands only submitted an initial 1.3 billion Euro application in May this year, a spokesman for the ECA said. The Dutch government plans to spend that first amount on investments in healthcare, education, building affordable housing and digitalisation. Over 5.4 billion Euro is available for the country in total.
In Germany, the money will be used to speed up planning and approval procedures in the transport sector and drive forward the digitalisation of administration, among other things. According to the latest information, Germany will be able to call up a total of 30.3 billion Euro in non-repayable grants.
Slovenia has completed, is implementing or is about to start implementing more than 1,000 projects. According to the Slovenian Recovery and Resilience Office, the country has so far received 841 million Euro in payments, of which 310 million Euro were loans. It has 1.61 billion Euro of grants available until the end of 2026 and can also benefit from 1.07 billion Euro of loans.
The state has so far disbursed around 500 million Euro, mainly for projects to provide public rental housing, increase the capacity of rail infrastructure, improve water supply, educational and health infrastructure. After the catastrophic floods in August 2023, Brussels approved amendments to Slovenia’s RRP that put even more emphasis on the Green Deal. Slovenia has so far completed 15 of the 36 reform measures required to qualify for funding.
EU’s public prosecutors investigate fraud related to post-pandemic recovery fund
Earlier this year, in April, financial police in Italy, Austria, Romania and Slovakia arrested 22 people and seized around 600 million Euro in connection with a European Public Prosecutor’s Office (EPPO) investigation of criminal organisations trying to defraud the EU.
The suspects allegedly have used a network of fictitious companies to apply for money from the EU-funded Next Generation EU recovery programme and then embezzled it, the EPPO said. The crimes took place between 2021 and 2023, the office alleged.
Specifically, the alleged criminal organisation was concerned with funds from the Italian National Recovery Programme. Using fictitious companies and with the involvement of front men, the suspects applied for large sums of money for various project initiatives, according to the police statement.
As a particularly hard-hit country, Italy is to receive the largest sum from the EU’s recovery programme at almost 200 billion Euro.
This article is published twice a week. The content is based on news by agencies participating in the enr.
Editor’s note: With regard to the inconsistencies in sources, the information on how many EU countries have applied for funding has been deleted. Graph 17 and 18 have been updated for clarification.