The following is a translation of an article written by the Minister for Regional Development and Public Administration and a researcher at the Europe Strategy Research Institute Tibor Navracsics, originally published on the Five Minutes Europe blog of Ludovika.hu.
The lifespan of the Recovery and Resilience Facility (RRF), established at the European Council meeting held at the end of 2020, is slowly coming to an end. The €650 billion programme, which was originally intended to mitigate the economic impact of the coronavirus pandemic and repair the damage it caused, consists of €359 billion in grants and €291 billion in loans. According to the original plans, it will accept payment requests from Member States until 31 August 2026. The Commission will then have until 31 December 2026 to settle these claims, thus completing the first economic recovery programme in the history of European integration to be financed by a Commission loan.
Perhaps due to its pioneering nature, the programme was difficult to implement even back in the day. France was the main proponent of the southern countries’ push, just as it had been the primary defender of the idea of EU borrowing. Many feared that the loan taken out by the Commission, which was secured by member state obligations, would become a driving force for federalization efforts, while others questioned the effectiveness of using the money. The German Presidency finally resolved the debate that lasted throughout 2020, and so at the last minute, the new financial instrument, the Recovery and Resilience Facility—adopted together with the multiannual financial framework—was made available to Member States from the following year.
The concerns led to fairly strict conditions being imposed. Member States received a share of both the grant and loan components of the fund based on a specific key, and they must not only use these funds by 2026 at the latest, but, as we have seen, they must also account for them in practice. In order to start using the funds, Member States must draw up so-called national recovery plans. The plans are approved by the Commission, which also agrees with the Member State on the so-called milestones that must be met during the use of the funds—or even before that, as a precondition. Depending on their performance, Member States can request the disbursement of funds twice a year, which the Commission can approve after assessing the achievement of the milestones.
From the outset, the system appeared complex. It reflected the caution of the Member States, which seemed justified given the loans they were guaranteeing, and the activist ambitions of the Commission, which became bolder now that it finally had a tool with which it could effectively influence reforms within countries. The complexity of the system, however, took its toll in the form of slow processes.
A significant number of Member States were already behind schedule in preparing their national recovery plans because they found it difficult to satisfactorily incorporate the criteria set out by the Commission, which then changed several times during individual negotiations, into their own plans. The delay in preparing the plans then led to delays in implementation. By the middle of the RRF period, Member States were so far behind in their implementation, and the Commission was so far behind in its disbursements that the success of the entire programme was called into question.
‘It…seems certain that leaving the 2026 deadline unchanged will mean the loss of billions of euros’
As the delay in implementation became apparent, Member States stepped up their efforts to persuade the Commission to extend the original 2026 deadline. Although this was the dominant topic regarding the operation of the RRF for much of 2024, the Commission felt it necessary to state at the beginning of this year that it saw no possibility of extending the deadline for using the financial instrument.
However, the Commission’s confidence does not change the fact that, to date, Member States have only used about half of the available funds. Although a certain acceleration in disbursements is expected in the remaining year, it still seems certain that leaving the 2026 deadline unchanged will mean the loss of billions of euros. In light of all this, there is a strong possibility that the Commission’s decision of 4 June, according to which projects must still be completed by 31 August 2026, is not the final word on the matter. Pressure from Member States is likely to increase as the available time runs out.
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