Filenews 3 September 2024
Recovery and Resilience Facility funds are entering the EU's real economy more slowly than expected, the European Court of Auditors found in a new report, warning of risks of further slowing absorption and not completing projects as planned.
By the end of 2023, Member States had raised less than a third of their pandemic recovery funds, while final recipients had received only around half of the money transferred from Brussels to national treasuries.
What Cyprus is doing
Indicatively, Cyprus had submitted by the end of 2023 40% of the payment requests foreseen by the indicative timelines foreseen in the operational arrangements, compared to 70% in the EU average. Also, by the end of 2023, 8% of the funding for Cyprus had been disbursed, and 5% of the milestones (14 out of 271 milestones) had been satisfactorily met.
Commission 'hopes' to exploit them
The Commission immediately commented on the European Court of Auditors' report, welcoming it and calling it a "generally positive" report. "The Recovery and Resilience Facility demonstrates the power of performance-based tools to support the implementation of reforms and investments, and the Commission is fully committed to making good use of it by the end date of 2026," a Commission spokesperson said in a written statement.
"We are working closely with Member States to support the timely and effective absorption of RRF funds, including to ensure that the funds reach citizens and businesses as soon as possible," the spokesperson added, welcoming the ECA's recognition of the importance of the Commission's role.
Delays and congestion
Delays in the first three years of implementation of the Recovery and Resilience Facility, worth a total of €724 billion, undermine the achievement of the facility's objectives, according to a statement from the European Court of Auditors. Although there has been a relative acceleration in the pace of payments by the European Commission, it is likely that Member States will not be able to claim or absorb the funds and complete the measures before the end of the Facility in August 2026.
"Timely absorption of RRF funds is important, not only to avoid bottlenecks in implementing measures towards the end of the instrument's implementation period, but also to reduce the risk of inefficient or even incorrect spending," said Ivana Maletić, the ECA Member responsible for the audit.
The facility was established in February 2021 and finances reforms and investments in EU countries, covering the period from the start of the pandemic in February 2020 until August 2026. It focuses on six priority areas, including the green transition and digital transformation, while the release of funds is linked to the progress of projects.
There are also positives
On a positive note, the ECA notes that with pre-financing, which could amount to up to 13% of the total amount, Member States received more money at the beginning of the mechanism.
By the end of 2023, the Commission had transferred only €213 billion to national treasuries. However, these funds were not necessarily disbursed to their final recipients, including private companies, state-owned energy companies and schools. In particular, almost half of the Facility funds disbursed to the 15 Member States providing information to the ECA had not yet been paid to final recipients.
All countries "backward"
Almost all countries were late in submitting their payment claims to the Commission, the main reasons being inflation, supply shortages, uncertainty over environmental rules and insufficient administrative capacity. By the end of 2023, Member States had submitted 70% of the requests expected as planned, 16% less than expected.
In fact, seven Member States had not received any funds to satisfactorily meet milestones and targets. The Commission and Member States have taken measures to facilitate absorption, especially in 2023, but it is too early to assess the impact of these measures.
According to the auditors, there is still a risk that all planned measures will not be completed on time. By the end of 2023, less than 30% of the more than 6000 milestones and progress indicators had been met, with the remaining milestones potentially the most challenging.
Most countries prioritised reforms before investing, but concentrating reforms towards the end of the instrument's implementation period is likely to further increase delays and slow absorption.
Finally, it is not necessary that disbursements are a function of the number of milestones and progress indicators. In other words, it is possible to disburse substantial amounts of money without the Member States having completed the corresponding measures. The ECA stresses that the rules do not foresee the possibility to recover funds if they have been paid for fulfilled milestones but the relevant measures are ultimately not completed.
The audit team of European auditors carried out on-site visits to four countries: Spain, Italy, Slovakia and Romania. Special report 13/2024, 'Absorption of Recovery and Resilience Facility funds – Progress but also delays, while risks to the completion of measures have not disappeared, undermining the achievement of the objectives of the RRF', is available on the ECA's website.
CNA
