European auditors: Covid recovery money trickles slower than planned into real economy
The first three years of the EU’s 724 billion euro Recovery and Resilience Facility (RRF) have seen delays in funds being disbursed and projects being implemented, according to a report by the European Court of Auditors, released on September 2.
This put at risk the achievement of goals for helping EU countries recover from the Covid-19 pandemic and making them more resilient, the European Court of Auditors said.
Even though the rate of payments from the European Commission is progressing, member states might not be able to draw down or absorb the funds in time, complete their planned measures before the RRF expires in August 2026, and thus gain the expected economic and social benefits.
Established in February 2021, the RRF finances reforms and investments in EU countries, starting with the onset of the pandemic in February 2020 and ending in August 2026. It centres on six priority areas, including the green transition and digital transformation. Countries can receive the money based on the progress they make.
“Timely absorption of the RRF is essential: it helps to avoid bottlenecks in carrying out the measures towards the end of the Facility’s lifespan, and reduces the risk of inefficient and erroneous spending,” said Ivana Maletić, the ECA Member in charge of the audit.
“We are flagging risks, as EU countries had drawn down less than a third of the planned funds at the halfway point and made less than 30 per cent progress towards reaching their pre-defined milestones and targets.”
On a positive note, pre-financing of up to 13 per cent of the amount the member states could receive allowed more funds to be paid out quickly at the start, which was in line with the goal of responding to the crises, the auditors said.
However, the auditors are critical of the pace at which the bulk of the funds have being drawn down since.
By the end of 2023, only 213 billion euro had been transferred from the Commission to national coffers. These funds have not necessarily reached final recipients, including private businesses, public energy companies, and schools.
In fact, almost half of the RRF funds disbursed to the 15 member states that provided the necessary information had not yet reached final recipients.
Almost all countries experienced delays in submitting payment requests to the Commission, often because of inflation or supply shortages, uncertainty about environmental rules, and insufficient administrative capacity.
By the end of 2023, they had submitted 70 per cent of their planned requests, and for around 16 per cent less money than expected; for different reasons, seven countries had not received any funds for the satisfactory fulfilment of milestones and targets.
The Commission and member states took action, particularly in 2023, to facilitate absorption, though it is too early to assess any impact.
There is a risk that not all planned measures will be completed in time.
By the end of 2023, less than 30 per cent of the total of over 6000 milestones and targets (i.e. indicators of progress) were presented for payment, meaning that a significant number – possibly the most difficult ones – are yet to be fulfilled.
Most countries frontloaded reforms before proceeding with investments. However, backloading investments is likely to increase delays further and slow down absorption.
Lastly, disbursements do not necessarily reflect the quantity and importance of the milestones and targets, meaning that significant funds could be paid without member states completing the corresponding measures.
The auditors emphasise that the rules make no provision for recovering funds when milestones and targets are fulfilled, but measures are ultimately not completed.
(Photo: G Schouten de Jel)
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