EU recovery fund disbursement slow at mid-point of scheme, auditors warn

EU recovery fund disbursement slow at mid-point of scheme, auditors warn

By Jan Strupczewski

Only a third of the European Union's recovery fund cash had reached members by the end of last year and there is a risk it will not be fully used as governments miss agreed milestones for payouts, the European Court of Auditors (ECA) said.

The EU raised 724 billion euros ($801.40 billion) for the Recovery and Resilience Facility (RRF) after the COVID-19 pandemic to restart the 27-nation bloc's economy.

In a report released on Monday, the auditors said that by the end of 2023, the mid-point of the scheme that is to last until 2026, only 213 billion euros had been transferred to EU governments.

"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% progress towards reaching their pre-defined milestones and targets," the ECA's Ivana Maletic, in charge of the audit, said.

The payout of the money from the RRF in a mix of grants and cheap loans depends on governments fulfilling pre-agreed criteria. Half way through the scheme, only a third of the total 6,000 targets - indicators of progress - were met by the 27 governments.

The report said that for different reasons, seven EU countries - Belgium, Finland, Hungary, Ireland, the Netherlands, Poland and Sweden - received no recovery cash at all by the end of 2023 and will now have to accelerate the drawing down of the funds to make the 2026 deadline.

France was the only one that received more than half - 59% - of its allotted recovery cash, but Portugal, Spain and Italy were not far behind, with disbursements of 46% of their six-year allotment.

The remaining three years of the scheme might prove to be even more challenging, the report said.

"We consider that there are risks to timely absorption and the completion of measures in the second half of the RRF’s implementation," the report said.

"More specifically, a significant number of milestones and targets remain to be fulfilled and they may be more difficult to achieve. In addition, the shift from reforms to investments is likely to further increase the risk of delays," the report said.

The ECA said most of the delays were caused by external circumstances, like high inflation, supply shortages and changes in the political context. Another common cause was governments underestimating the time needed to implement the agreed reforms due to public procurement and state aid rules.

Adding to the difficulty, some EU governments, which receive large amounts of RRF money on top of already large payouts from the EU's regular cohesion funds for equalising standards of living across the bloc, found it administratively hard to quickly allocate and spend such large amounts of EU money, the ECA said.