Next Generation EU

The one-time Recovery fund NGEU, eventually set up on the European summit in July 2020, aims to repair the damage caused by the COVID-19 pandemic whilst supporting the Union’s green and digital long-term objectives.[8]

The funds borrowed will be used for 390 billion € in relief grants and 360 billion € in longer-duration loans[9] and will be repaid by 2058.[10] The package seems large, but will have a net fiscal effect across the Eurozone of just 1% annually.[11] 672.5 billion € will be allocated to the Covid19 Recovery and Resilience Facility (RRF) as the main instrument,[12] 77,55 billion € to minor programs such as ReactEU, Just Transition Fund, Rural Development etc.[13]

NGEU is limited in time: 70% of the grants provided by the RRF will be committed in the years 2021 and 2022. The remaining 30% shall be committed in 2023.[14] Allocation keys for the years 2021–2022 are unemployment rate and for the year 2023 cumulative loss in real GDP observed over the period 2020–2022.[15]

An overall climate target of 30% will apply to the total amount of expenditure from the MFF and NGEU in compliance with the Paris climate accord[16] and in line with the objectives of the European Green Deal, the flagship initiative to address the climate emergency.[17]

NGEU is a push to a unified European fiscal policy. The EU will search for new revenue sources. As a first step, a new own resource based on non-recycled plastic waste will be introduced as of 2021. In the years to follow additional own resources are planned[18] for repayment of NGEU borrowing.[19]

With the departure of the UK, there was also hope of phasing out the perk of national rebates in the EU.[20] But instead of this, the budget deal provides NGEU-skeptical Germany and the so-called Frugal Four Denmark, the Netherlands, Austria and Sweden with even larger rebates, in total 53.2 billion €[21] for the 2021–2027 budget period financed by all Member States according to their GNI.[22]

The NGEU mentions the importance of rule of law but remains deliberately vague.[23] Any strong conditionality concerning the governments of Poland and Hungary, accused of repeated breach of Article 7 of the Treaty on European Union, will be avoided.[24][25]

To receive support from the RRF, member states – technically assessed by the Commission – must prepare national Recovery and Resilience Plans (RRP), including targets, milestones and estimated costs.[26] Eventually the European Council will politically approve the proposals voted by qualified majority.[27]

The RRP must outline how each member state intends to use these investments to contribute to the green and digital priorities foreseen by the Commission. In order to do so, two targets have been set: 37% of the spending must be devoted to green and 21% to digital investments.[28]

The deadline for submission of the Recovery and Resilience plans is 30 April 2021. Member States are encouraged to submit a preliminary draft plan from 15 October 2020.