At a slower rate than expected, the funds from the EU countries flow into the real economy Recovery and Resilience Mechanism (RRF) for the recovery from the pandemic, emphasizes the report of the European Court of Auditors (ECA) published today.

According to the EEC report, delays in the disbursement of funds and the implementation of projects characterized the first three years of implementation of the Recovery and Resilience Mechanism (RMF), totaling 723.5 billion euros (338 billion euros in grants and 385, 8 billion euros in loans). The ECA emphasizes that these delays undermine the achievement of the Mechanism’s objectives to support EU countries’ efforts to recover from the pandemic and their resilience.

What are the costs of delays?

The MFA established in February 2021 to finance reforms and investment in EU countries, including in the green and digital transition, has an expiry date of 31 August 2026. The ECA sounds the alarm that Member States may not be able to claim or absorb the funds in time and complete the measures they have planned and therefore not have time to reap the expected economic and social benefits.

“We highlight the risks involved in the fact that, already half way through the implementation period, EU countries have claimed less than a third of the earmarked funds and met less than 30% of their pre-set milestones and target prices,” he said Ivana Maletić, member of the EAC and responsible for control. According to her, “the importance of the timely absorption of the MAA funds is great, not only in order not to observe congestion phenomena in the implementation of measures towards the end of the period of application of the mechanism, but also to reduce the risk of inefficient or incorrect expenses”.

On the other hand, the ECA considers as “positive” the fact that with pre-financing, which could reach up to 13% of the amount they were entitled to, the Member States collected more money from the authorities, in full agreement with the objective of tackling of the crisis.

However, in its report, the ECA criticizes the pace of disbursements since then. By the end of 2023, the Commission had disbursed to national public funds just €213 billion (including €56.5 billion in the form of pre-financing). However, these funds did not necessarily reach their final recipients, including private enterprises, state-owned energy companies, universities, schools, etc. In particular, almost half of the MAA funds that had been disbursed to the 15 Member States that provided the necessary information to the EAC, had not yet reached the final recipients.

The Greek case

In particular, as far as Greece is concerned, by the end of 2023, the Commission had disbursed 40% of the total funds of the MAA, following the satisfactory fulfillment of 26% of all milestones and target prices, taking into account the amounts of pre-financing. It is noted that the total number of milestones and target prices for Greece is 331 – among the highest in the EU. With funds of 35.9 billion euros corresponding to 16.3% of its GDP, Greece is one of the biggest beneficiaries of the Recovery and Resilience Mechanism resources in the EU in terms of GDP.

Why were the proceedings delayed?

Almost all countries were late in submitting their payment requests to the Commission, and the reasons were usually inflation or supply shortages, uncertainty about environmental rules and insufficient administrative capacity. By the end of 2023, countries had submitted 70% of the expected requests, for an amount 16% lower than predicted. In fact, seven countries, for various reasons, had not received any funds for the satisfactory fulfillment of milestones and target prices. The Commission and Member States have taken measures to facilitate uptake, especially in 2023, but the ECA considers that it is too early to assess the impact of these measures.

“The risk that all the planned measures will not be completed on time is real,” emphasizes the EAC. By the end of 2023, the payment requests submitted covered 28% of the 6,234 milestones and targets (i.e. progress indicators). This means that a significant number of them remain to be fulfilled, possibly the most demanding. Most countries prioritized reforms before investing. However, the concentration of investment towards the end of the Facility’s implementation period is likely to further increase delays and slow absorption, the ECA warns.

Finally, it is pointed out that disbursements are not necessarily a function of the number of milestones and targets. In other words, it is possible to pay significant funds without Member States having completed the corresponding measures. The EAC emphasizes that the rules do not provide for the possibility of recovering funds from the European Commission, in case they have been paid for fulfilled milestones and objectives, but the relevant measures are not finally completed.

It is noted that by the end of 2023 the Commission had undertaken commitments of 648 billion euros for grants and loans to the 27 member states. By “absorption” the EEC means the disbursement of EU funding by the Commission to the Member States (beneficiaries and borrowers). The audit team carried out on-site visits to four countries: Spain, Italy, Slovakia and Romania.