ZEI Monitor: EU Progress 2019-2024

EU Recovery Instrument ('Next Generation EU')

• Entry into force - the Recovery and Resilience Facility:

On the 18th of February 2021, the Regulation establishing the Recovery and Resilience Facility entered into force. The Facility is the key operational pillar of the EU Recovery Instrument which came into effect in December 2020. It is based on a Proposal for a Regulation submitted by the European Commission on the 28th of May 2020. The EU Commission plans to borrow at least 150 billion euro every year until 2026 to finance the instrument.

General Objectives: To create a facility to promote the economic, social and territorial cohesion of the Union in the context of the COVID-19 crisis. According to Art. 3 of the Regulation, the scope is structured in six pillars: a) green transition b) digital transformation c) smart, sustainable and inclusive growth d) social and territorial cohesion, e) health and economic, social and institutional resilience f) policies for the next generation.

Financial volume (in 2018 prices) allocated to the member states:

Grants of 312.5 billion euro

Loans of up to 360 billion euro

The 312.5 billion euro in grants (referred to as the "financial contribution" in the Regulation) are fed by the total volume of the Recovery Instrument adopted in December 2020, which amounts to 384.4 billion euro in repayable and non-repayable support (see ZEI Monitor 2020 / Council Regulation 2020 / 2094) The "financial contribution" is either allocated to the member states or can be used by them for their own allocations.

Distribution criteria: The maximum financial contribution that member states may receive is calculated as follows: 70 per cent of the contribution is based on the population size, inverse GDP per capita, and relative unemployment rate. The remaining 30 per cent of the contribution is calculated based on inverted GDP per capita and in equal parts on the change in real GDP in 2020 and the cumulative change in real GDP over the period 2020-2021. By the 31st of December 2022, the Commission will provide the 70 percent and in 2023 the remaining 30 percent.

Operating principle: Member states prepare national recovery and resilience plans; these must include a reform and investment agenda. The plans must take into account country-specific challenges, European Semester priorities and the Council's recommendation on economic policy. After the plans are presented, a financial amount is made available for allocation at the discretion of the Commission.

Assessment by the Commission: The Commission monitors the implementation and measures the achievement of the objectives. For this purpose, the Commission shall implement a buildout and resilience scoreboard. The scoreboard shall serve as a performance reporting system. By the 31st of July 2022, the Commission shall submit a review report to the Parliament and the Council. The assessment report shall include a quantitative evaluation of the contribution of the recovery and resilience plans on the following areas: (i) the climate target of at least 37 per cent; (ii) the digital target of at least 20 per cent; (iii) each of the six pillars referred to in Article 3; By the 20th of February 2024, the Commission shall provide the European Parliament, the Council, the European Economic and Social Committee, and the Committee of the Regions with an independent evaluation report on the implementation of the Facility, and by the 31st of December 2028, the Commission shall provide them with an independent ex-post evaluation report.

Deepening the Capital Markets Union

• a) Investment protection and facilitation framework (legislative, incl. impact assessment, Article 114 TFEU, Q2 2021)

• b) Revision of prudential rules for insurance and reinsurance companies (Solvency II) (legislative, incl. impact assessment, Articles 53(1), 62 and 114 TFEU, Q3 2021)

• c) Revision of the Markets in Financial Instruments Directive and Regulation (legislative, incl. impact assessment, Article 114 TFEU, Q4 2021)

Sustainable corporate governance

• Sustainable corporate governance (legislative, incl. impact assessment, Articles 50 and, possibly, 114 TFEU, Q2 2021)
   

EU green bond standard

• Establishment of an EU green bond standard (legislative, incl. impact assessment, Article 114 TFEU, Q2 2021)

Anti-money laundering package

• Anti-money laundering legislative package (legislative, incl. impact assessment, Article 114 TFEU, Q1 2021)
   

Fair economy package

• a) Action plan on the European Pillar of Social Rights (non-legislative, Q1 2021)

• b) Recommendation for a European child guarantee (non-legislative, Q1 2021)

• c) Communication on a new occupational safety and health strategy framework (non-legislative, Q2 2021)

• d) Action plan for the social economy (non-legislative, Q4 2021)

Generalised scheme of preferences in the Common Commercial Policy

• Towards the future generalised scheme of preferences legal framework granting trade advantages to developing countries (legislative, incl. impact assessment, Article 207 TFEU, Q2 2021)

Detering and counteracting coercive actions by third countries

• Instrument to deter and counteract coercive actions by third countries (legislative, incl. impact assessment, Article 207, Q4 2021)
   

Performance framework 2021-2027

• Communication on the performance framework 2021-2027 (non-legislative, Q2 2021)

Completing the Banking Union

• Revision of the bank crisis management and deposit insurance framework (legislative, incl. impact assessment, Article 114 TFEU, Q4 2021)

Excise duties package

• a) Revision of the tobacco taxation Directive (legislative, incl. impact assessment, Article 113 TFEU, Q3 2021)

• b) Amendment of the Directive on general arrangements for excise duties (legislative, incl. impact assessment, Article 113 TFEU, Q4 2021)

Social Europe

• EU-SURE Bond Emission:On the 21st of October 2020, the European Commission for the first time conducted an emission of the EU-SURE social bond worth 17 billion euro. (Press release)

• SURE-Regulation - Entry into force: On the 20th of May 2020, the SURE-Regulation on short term work came into force after publication in the Official Journal of the European Union. This enables the European Commission to issue social bonds on the capital market, in particular to secure jobs. It contains 16 articles on the conditions and procedure for financial assistance from the member states.

• SURE Regulation - Legislative proposal: The legal act is based on a Proposal  for a Regulation of the European Commission dated on the 2nd of April 2020 for the solidarity instrument SURE. With the submitted draft, the Commission wants to support the member states in their short time work programs and similar measures in connection with the coronavirus pandemic. (Press release)

The Commission's objective is to mitigate the consequences of the coronavirus outbreak and its socio-economic impact, in particular by protecting jobs and thus livelihoods and human lives. In order to achieve this, the regulation creates a European instrument, which temporarily helps the member states to reduce the risk of unemployment (SURE). The measure is temporary, its duration and scope is limited to dealing with the consequences of the pandemic. Payment is conditional on actual or planned public expenditure by the member states, which has increased substantially as a result of measures taken to deal with the coronavirus outbreak. The aid package offers a total of up to 100 billion euro for the support program. The assistance takes the form of a loan to the member state concerned, the loan contract is concluded with the European Commission. The applicant states must provide a binding guarantee.

Economic Governance: EU Recovery Instrument ('Next Generation EU')

• Entry into Force: EU Recovery Instrument

On the 14th of December 2020, the Council Regulation 2020/2094 establishing a European Union Recovery Instrument to support the recovery from the COVID-19 crisis entered into force. The instrument will be financed on the basis of the authorization under Article 5 of the Own Resources Decision up to the amount of 750 billion euro in 2018 prices. The 750 billion euro package (in 2018 prices as part of the 2018 budget counting process) now totals around 800 billion euro in 2021 prices. The amount is allocated as follows:

Non-repayable grants of up to 384.4 billion euro:

Of this amount, 312.5 billion euro (in 2018 prices) are allocated to the Recovery and Resilience Facility, which entered into force in February 2021. The remaining funds of 71.9 billion euro are distributed among the following financial instruments:

(i) up to 47.5 billion euro for structural and cohesion programmes under the Multiannual Financial Framework 2014-2020 reinforced until 2022;

ii) up to 10 billion euro for programmes to support territories in their transition to a climate-neutral economy;

(iii) up to 7,5 billion euro for the development of rural areas;

(iv) up to 5 billion euro for research and innovation programmes;

v) up to 1.9 billion euro for civil protection programmes;

Loans of up to 360 billion euro
(in 2018 prices)

Budget guarantees of up to 5.6 billion euro to support investments (in 2018 prices)

The Commission will submit a report to the Council by October 31, 2022 on the progress made in implementing the instrument and the use of the funds.

• Proposal for a Council Regulation on an "EU Recovery Instrument":

On the 28th of May 2020, the European Commission presented a Proposal for a Council Regulation on the Establishment of a European Union Recovery Instrument to support the recovery in the aftermath of the COVID-19 pandemic. The Instrument shall be financed up to an amount of 750 billion euro. The support will include grants, loans and guarantees.

Grants shall amount to 433.2 billion euro in the form of non-repayable support and repayable support through financial instruments.

Loans to the member states will be up to 250 billion euro for a programme financing recovery and economic and social resilience via support to reforms and investments.

Guarantees of up to 66.8 billion euro.    

• Key operational pillar - the 'Recovery and Resilience Facility':

As the key pillar of 'Next Generation EU', the European Commission on the 28th of May 2020 put forward a Proposal for a Regulation establishing a Recovery and Resilience Facility.

Key principles and elements include:

General objective: Promoting the Union’s economic, social and territorial cohesion by improving the resilience and adjustment  capacity of the member states, mitigating the social and economic impact of  the crisis, and supporting the green and digital transitions, thereby contributing to restoring the growth potential of the economies of the Union, fostering employment creation in the aftermath of the COVID-19  crisis, and promoting sustainable growth.

Financing volume: a. 334.95 billion euro in grants for non-repayable support; b. 267.955 billion euro for  loan support to member states

How does it work? A maximum financial contribution shall be calculated for each member state for the allocation of the amount of the GRANTS based on the population, the inverse of the per capita Gross Domestic Product (GDP) and the relative unemployment rate of each member state.

Additionality: Support under the Recovery and Resilience Facility shall be additional to the support provided under other Union funds and programs.

Eligibility criteria: Member states shall prepare national recovery and resilience plans. These plans shall set out the reform and investment agenda of the member state concerned for the subsequent four years. Recovery and resilience plans eligible for financing under this instrument shall comprise measures for the implementation of reforms and public investment projects through a coherent package
The recovery and resilience plans shall be consistent with the relevant country-specific challenges and priorities identified in the context ofthe European Semester, in particular those relevant for or resulting from the green and digital transition.

Compliance of member states: Where the recovery and resilience plan does not comply satisfactorily with the criteria / modes of use set out in Article 16(3) of the Regulation, no financial contribution shall be allocated to the member state concerned.

Deepening the Capital Markets Union

Completing the Banking Union

Effective Taxation

Customs Union Package