NextGenerationEU: The EU’s Recovery Plan for Europe
Source: European Commission
By Marina Veljkovic, 4 minutes.
For more than a year, the Member States across the entire Union experienced increased expenditure due to Covid-19 measures and restrictions. What further hindered the economy was the immense effort to tend to the needs of healthcare systems in an attempt to protect public health. With the risk of an economic crisis, many Member States resorted to aiding businesses in order to sustain their operations and to provide liquidity to their economy. Nevertheless, the pandemic debts are rising in all Member States, setting the requirements of the EU Stability and Growth Pact for countries aside. Normally, the states are required to remain within the limits of the public debt of a maximum of 60% of the GDP and a government deficit of 3% of the GDP. However, these requirements cannot be fulfilled nor applicable in the time of the pandemic, as stated by Paolo Gentiloni, the EU Economy Commissioner.
How will the Union and its Member States tackle the economic crisis caused by the Covid-19 pandemic?
The EU responded to the pandemic by supporting healthcare systems, the research and development of Covid-19 vaccines, coordinating on travel and helping its partners globally. The Union has also taken action to minimise the pandemic’s toll on the European economy and it plans to do so by helping the Member States recover and become economically resilient through recovery packages. There are currently €540 billion of funds at the disposal of the three so-called “safety-nets”, namely the workers, businesses and the Member States. If you are curious about the amounts of financial support for jobs and workers per EU country make sure to click on this link.
In April 2020, shortly after the Covid-19 virus spread through European countries, the EU leaders deliberated on and decided to establish a European Union recovery fund to ease the effects of the crisis.
The European Commission proposed a recovery plan for Europe in May 2020 and several months later, in July, the EU leaders agreed on a €750 billion recovery fund named ‘Next Generation EU’. In addition, the Union leaders agreed on a long-term EU budget (also known as the Multiannual Financial Framework or the MFF) of €1 074.3 billion, meant to support green and digital transitions and resilience in the period 2021-2027. The complete EU recovery package is hereby totalling €2 364.3 billion.
In November 2020, the Council presidency and the EU Parliament reached a preliminary agreement on the package, while in December, the European Council gave its green light for the process of adoption.
On February 11, 2021, the Council adopted a Regulation, establishing the Recovery and Resilience Facility (RRF). The Council called it ‘the central pillar of the recovery plan for Europe’.
Note: Only the most important events are mentioned in this article. Many more important meetings and events took place in the time frame April 2020 - April 2021 but due to clarity reasons, they will not be addressed in this article. If you wish to consult further on the timeline, make sure to visit this website.
What is Next Generation EU?
Next Generation EU (NGEU) is a temporary recovery instrument implemented for the purpose of stimulating the repair of the social and economic damage brought by the coronavirus pandemic. The NGEU consists of 7 different programmes and initiatives. The latter are the Recovery and Resilience Facility (RRF), ReactEU, Horizon Europe, InvestEU, Rural Development, Just Transition Funds (JTF) and RescEU. If you are curious about the financial breakdown of this instrument and other information such as allocated amounts per EU country, do not hesitate to read more about it here.
What is the Recovery and Resilience Facility?
The Recovery and Resilience Facility (RRF) is the Regulation adopted by the Council on February 11, 2021, set to aid the Member States in their pursuit of easing economical and social consequences of the Covid pandemic through green and digital transitions. With €672,5 billion in grants and loans, the RRF is the centrepiece of the Next Generation EU. The ultimate goal of the Facility is for EU countries to become more resilient and sustainable.
Source: European Commission
The Member States will be eligible to receive these funds if they submit their national recovery and resilience plans including their reforms and agendas which are to be adopted until the year 2026, by 30 April 2021. The countries must present a “coherent package of projects, reforms and investments in six policy areas”. These are the green transition, digital transformation, smart, sustainable and inclusive growth and jobs, social and territorial cohesion, health and resilience and policies for the next generation, including education and skills.
Quick summary of the timeline:
March 2020 → Covid-19 hits Europe
April 2020 → EU leaders decide to establish the European recovery fund
May 2020 → European Commission issues its recovery plan proposal
July 2020 → EU leaders agree on the recovery package and the European budget for 2021-2027
November 2020 → Council and EU Parliament preliminarily agree on the package
December 2020 → European Council gives green light for the process of adoption of the package
April 2021 → Council adopts a Regulation, establishing the Recovery and Resilience Facility (RRF)
Deadline: 30 April 2021 → EU Member States must submit their national recovery and resilience plans including their reforms and agendas until 2026