Commission demands more precision and ambition in national recovery plans

European Commission Executive Vice-President in charge of Economy, Valdis Dombrovskis, said that the Commission will monitor "very closely" that member states include effective systems to prevent corruption and fraud with the recovery funds. [European Commission]

Member states should include more specific milestones and targets and more ambitious reforms in their recovery plans to access the unprecedented stimulus package to combat the COVID pandemic, the European Commission warned on Tuesday (19 January).

The implementation of the recovery fund, through the national plans, is the top economic priority for the EU in 2021. The message is clear: the €800 billion fund offers a unique opportunity not only to overcome the biggest recession in the EU history but also to make European economies more sustainable, digital and inclusive. 

The European Commission, and member states, want to ensure that the money is used to that end in their investment and reform plans. These are the key elements to look at:

Reforms. The 27 governments have to submit their recovery plans by April. The Commission has warned those who already sent their drafts (around half of the capitals) that they should further strengthen the reform component. 

Commission vice-president for economics, Valdis Dombrovskis, stressed on Tuesday that “there is still a lot of work ahead” in defining “specific and measurable” milestones and goals for the disbursements of EU funds, and “solid” estimates of the costs to be financed. 

Dombrovskis also called for “the right level of ambition” when countries address the Commission’s recommendations that they should follow to design their reforms. 

Member states will also have to include “effective systems to prevent, detect and correct conflicts of interest, corruption and fraud”, Dombrovskis said, as the Commission will monitor “very closely” this issue during the coming weeks and months.

2021: Build back to the future

The EU will double down on its efforts to use the Covid-19 crisis to accelerate the ‘Green’ and digital transitions, fuelled by its €1.95 trillion stimulus, an intense policy agenda and new trade opportunities to improve its global standing.

Timeline.  Governments are in talks with the Commission to finalise their drafts with the aim of sending their final versions by the end of February. By then, the Recovery and Resilience Facility, the main pillar of the recovery fund which will finance the national plans, will conclude its approval process by the European Parliament and the member states.

The Commission will then have two months to deliver its final verdict on each national plan, followed by an additional month for finance ministers to give the green-light (via the Ecofin Council). By that time, at the end of May or early June, the Commission hopes that the EU27 would have already concluded the national ratification process of the new EU budget ceiling, necessary for the EU to borrow the €800 billion for the recovery fund. The Commission expects to make the disbursement of the first tranche of the stimulus (13% of the total), by the end of the first semester. 

Control: National governments will not only have to obtain a approval by the Commission, but they will be also controlled twice a year by an Economic and Financial Committee in order to obtain new disbursements of the recovery funds. This committee brings together representatives of the finance ministries and central banks. The Netherlands succeeded in introducing an ‘emergency brake’ during this control process, so a single country could stop disbursement in case of serious concerns with the implementation of a national plan, and raise the issue to the level of EU leaders.

Control will not only pay attention to investments and structural reforms, but also to the deficit and debt targets once the Stability and Growth Pact is reactivated. The fiscal rules, however, will continue to be suspended at least until 2022.

The European Parliament succeeded in watering down these conditions, and the amount of recovery funds that could be suspended was reduced to 25%.

EU leaders unlock historic €1.8 trillion budget deal

EU leaders accepted on Thursday (10 December) the compromise reached between Germany and Hungary and Poland to unblock the EU budget package totalling €1.8 trillion, after the European Commission clarified that the Rule of Law mechanism will be valid from 1 January.

[Edited by Benjamin Fox]

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