The Covid-19 pandemic has brought a severe economic contraction in EU countries through a massive shock to demand and a severe disruption of supply chains.
Exceptional times require exceptional resources. In December 2020, the EU finally agreed on a long-term EU budget (the Multiannual Financial Framework 2021-2027) and a new instrument called Next Generation EU, with a combined financial firepower of €1,820 billion. This package significantly reduces uncertainty in the European economy and signifies a new level of fiscal coordination at the EU level. The New Recovery and Resilience Facility (RRF) was also finally agreed on February 12, 2021, with the hope to mitigate the economic and social impact of the Covid-19 pandemic. Through the RRF, a total of €672.5 billion will be made available to the Member States through grants and loans.
Member States are now expected to deliver concrete results through their national Recovery and Resilience Plans by presenting reforms and investment projects. It is a unique opportunity that no country can afford to miss. Nonetheless, they must quickly develop appropriate and well-managed projects that are matched by adequate structural reforms.
This paper reviews the state of play as of early February 2021 and highlights the challenges and opportunities posed for the EU Member States to ensure that funds will be used in ways that result in a real transformation of Europe’s economies.