European auditors: EU’s Covid recovery fund RRF has several weaknesses
The EU’s Covid recovery fund – the Recovery and Resilience Facility (RRF) – suffers from several weaknesses in terms of performance, accountability and transparency, the European Court of Auditors (ECA) said in its review of the 650 billion euro crisis spending, the results of which were released on May 6.
“Although the RRF has played a crucial role in the EU’s post-pandemic recovery, information on results is scarce, and there is no information on actual costs,” the ECA said.
“As a result, it is not clear what citizens actually get for their money.”
The auditors call on EU policy makers to draw lessons from this when mulling future budgets based on performance rather than costs.
The RRF was established in 2021 at a time of crisis. It finances measures – reforms and investments – in areas such as the green or digital transitions.
EU countries must achieve predefined milestones and targets set out in their national plans in order to receive funding. This is the first time that the EU has used financing not linked to costs on such a large scale.
“EU policymakers must draw lessons from the RRF, and not allow any future similar instrument without having information on actual costs, final recipients and a clear answer to the question of what the citizens actually get for their money,” Ivana Maletić, one of the two ECA Members behind the review, said.
Jorg Kristijan Petrovič, the review’s co-author, said: “For future performance-based budgets, funding must be better linked to results and clearly defined rules, otherwise such a system should not be used”.
The auditors highlight several issues with the RRF against a backdrop of ongoing political discussions on the EU’s long-term budget after 2027.
To begin with, they take the view that the RRF is not really a performance-based funding mechanism.
In actual fact, the RRF places greater emphasis on progress in implementation. In addition, its spending efficiency and value for money cannot be measured, as the European Commission does not collect data on actual costs, and information on results is scarce.
The auditors emphasise the importance of designing and running future spending programmes in a way that is not detrimental to accountability.
In spite of recent improvements, the RRF’s control safeguards are still not robust enough, the ECA said.
For example, the Commission mainly relies on member states to detect and correct serious irregularities and to ensure compliance with EU and national rules, but their systems do have weaknesses.
Moreover, the EU’s executive cannot impose financial corrections such as recovery of funds for individual breaches of procurement rules, except in cases of serious irregularities such as fraud.
This means that the Commission can make payments in full even when public procurement irregularities have occurred, as long as the agreed milestones and targets have been attained.
Furthermore, because of the way milestones and targets have been set, some EU countries receive considerable funds before they complete the projects.
“This poses a risk to the EU’s financial interests, as member states could end up keeping the money without completing the projects,” the ECA said.
Although the RRF’s implementation is progressing, it faces delays, thus jeopardising the achievement of its objectives.
In fact, the bulk of measures still need to be completed by August 2026. At the same time, disbursement of EU funds to national budgets does not mean that the money has reached the final recipients and the real economy.
The RRF is almost entirely financed by borrowing from the markets. The Commission managed to raise funds for the RRF both rapidly and successfully, the ECA said.
In the first few years, this was done when interest rates were historically low.
Interest rates have since risen, and financing costs could be more than double the initial estimates by 2026.
Together with repayments, this will put significant pressure on future EU budgets.
Where any future borrowing is concerned, the auditors believe it is important that the EU should properly mitigate interest risks and set out a loan repayment plan upfront, specifying where the money will come from. This was not the case for the RRF, the ECA said.
(Photo: G Schougen de Jel)
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