The European Union's €955 billion Recovery Fund, the largest since the Marshall Plan, faces serious challenges in achieving the goal of transforming the European economy, according to a Reuters analysis. Despite investments in digitalisation and decarbonisation, skills shortages, bureaucracy and uncertainty about long-term financing are limiting the impact of the historic support package.
In rural areas of Spain, projects with sensors and drones funded by the Next Generation EU program are collecting data on AI applications in agriculture. However, as noted by project coordinator Juan Francisco Delgado, the funds created data infrastructure and know-how, but not a sustainable business model, leaving open the question of continuity after the end of the funding.
High ambitions, mixed results
The Fund was launched in 2020, amid the historic drop in GDP due to the pandemic, with the aim of supporting the recovery through reforms and investments that would accelerate the green and digital transitions. More than €700 billion was initially made available as grants and loans, although the final amount available was limited to €577 billion as some Member States did not accept the loans.
Five years later, €182 billion have still not been disbursed, according to Reuters calculations from European Union data. The European Commission argues that the Fund has achieved its objectives, but officials and businesses speak of uneven results and delays that have dampened the growth momentum.
Delays, revisions and political friction
In Italy, the €194 billion plan has been revised six times, with one of them lasting almost a year. Economist Marco Leonardi notes that the changes, especially in 2023, slowed spending and led to a reduction in social goals, such as kindergartens. Similar criticisms were made in Spain, where part of the resources was directed to projects with limited development efficiency, according to the opposition.
Bureaucracy discouraged small businesses from applying, despite the fact that over 40% of Spanish funds were earmarked for SMEs. As it is emphasized, the demanding criteria presuppose administrative and technical capabilities that not all beneficiaries have.
Deadlines and extensions
Member states must complete the reforms by 31 August and submit their final payment claims by 30 September. Spain rejected more than €60 billion in loans, citing supply chain problems and technical difficulties, and secured permission to use €10.5 billion as capital to leverage additional government funding.
Similar spending extensions have been approved for Italy, which can allocate €23.5 billion beyond 2026. ING economist Carsten Brezski believes such extensions are reasonable, suggesting a 1-2 year extension and more flexibility in fiscal rules when structural reforms are implemented.
Despite the difficulties, government officials express optimism that the positive effects on growth and productivity will become more evident as projects move into the implementation phase. However, the question remains whether the Fund will be able to overcome the chronic obstacles that are delaying European economic transformation.
Capital.gr
