EU’s $800 Billion Recovery Fund Faces Delays and Risks, Says European Court of Auditors

The first three years of the European Union’s $800 billion Recovery and Resilience Facility (RRF) have experienced delays in both the disbursement of funds and the implementation of projects, according to a report released by the European Court of Auditors on September 2. These delays pose a risk to the achievement of the fund’s objectives, which aim to help EU countries recover from the Covid-19 pandemic and enhance their resilience.

While the European Commission has made progress in releasing payments, the report warns that member states may struggle to fully utilize the funds in time or complete their planned projects before the RRF’s expiration in August 2026, potentially missing out on anticipated economic and social benefits.

The RRF, established in February 2021, supports reforms and investments across EU countries, focusing on six priority areas, including green transition and digital transformation. Funding is allocated based on the progress countries make in these areas.

Ivana Maletić, the European Court of Auditors (ECA) member responsible for the audit, stressed the importance of absorbing the funds promptly to avoid bottlenecks towards the end of the Facility’s term and reduce the risk of inefficient spending.

Despite some initial success, such as pre-financing up to 13% of the total funds to allow for quicker disbursement at the outset, the auditors expressed concern over the pace of fund absorption. By the end of 2023, only $235.4 billion had been transferred from the Commission to member states, and much of this had not yet reached final recipients, such as private businesses, public energy companies, and schools. In fact, almost half of the funds disbursed to the 15 member states that provided data had not yet reached their intended recipients.

Delays in submitting payment requests to the Commission were widespread, driven by inflation, supply shortages, uncertainty around environmental regulations, and limited administrative capacity. By the end of 2023, only 70% of planned payment requests had been submitted, amounting to around 16% less money than initially expected. Additionally, seven countries had not received any funds for achieving their milestones and targets due to various challenges.

Both the European Commission and member states made efforts in 2023 to accelerate fund absorption, but it is too early to evaluate their impact. The auditors noted that there is still a risk that not all planned measures will be completed in time. By the end of 2023, less than 30% of the over 6,000 milestones and targets (indicators of progress) had been presented for payment, suggesting that a substantial number of, potentially the most challenging, targets remain unfulfilled.

Most member states focused on implementing reforms first, delaying investments. This backloading of investments is likely to cause further delays and slow down the absorption of funds. Additionally, the auditors pointed out that disbursements do not always correlate with the quantity and significance of the milestones and targets achieved, which could result in significant funds being released without corresponding measures being completed.

The report also highlights that current rules do not provide for the recovery of funds if milestones and targets are technically met, but the related measures are not fully completed.

Have you read?
Richest Countries In Europe In 2024.
Most Attractive Countries To Private Equity, Venture Capital, and Hedge Fund Investors.
Revealed: Highest-paid news media executive in the United Kingdom.
Countries Leading the Way on Climate Change.
World’s Best Countries For Adventure Tourism.