EU countries warm up recovery fund engine

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In this Special Edition of the Capitals, the EURACTIV Network provides you with the EU member states’ main priorities for their national recovery plans, whether they intend to rely on loans, grants or both, and whether they will be submitting their plans to the European Commission on time.

On Thursday (15 October), EU member states were asked to submit to the European Commission their national recovery plans in the context of the EU’s Recovery Fund, pledging to reform their economies in order to unlock their allocated share of this funding, which will be distributed from 2021 to 2023.

The plan, though scaled-down, is still a landmark agreement, which will give Brussels the unprecedented power to borrow hundreds of billions on the markets and hand it out as budgetary support to member states.

For many, the crucial question will be whether to apply only for grants or both grants and loans.

“Not taking out RRF loans doesn’t prevent a member state from receiving grants,” a source close to the issue told EURACTIV.

At the same time, the Council can suspend, on a proposal from the Commission, commitments from the EU funds, including from the EU’s Recovery and Resilience Facility once it is approved, either when a member state is in excessive deficit and fails to take effective action to correct it, or when it is in a macroeconomic imbalance procedure and fails twice to take the recommended actions.

However, suspension of recovery funds for failing to correct excessive deficit doesn’t apply now given that the Stability and Growth Pact is suspended.

Nevertheless, EU officials point out that member states do have to pay attention to the medium-term trajectory and avoid taking fiscal measures with a permanent impact on the economy.

ONLY LOANS

While Germany is still working out its recovery plan, digital education and support for regions hit hardest by the energy transition are among the government’s key priorities as schools will be equipped with high-tech teaching materials, and former coal-mining regions will receive boosts to develop their infrastructure.

“The country’s national recovery will likely only consist of loans,” a government official told EURACTIV Germany.

A MIX OF GRANTS AND LOANS

France‘s government presented its €100 billion Recovery Plan on 3 September, of which €40 billion will come from the EU in the form of subsidies. The French plan is based on three pillars: green recovery (30%), competitiveness and cohesion.

“France will probably not call on the €360 billion in loans, since the cost of financing on the markets is currently slightly higher,” the cabinet of Economy Minister Bruno Le Maire told EURACTIV France.

“We will send in the coming days our requests for grants for the recovery and resilience plan,” the cabinet confirmed.

Italy’s recovery plan, which was detailed and discussed by parliament in September, will be based on the totality of allocated funds in the form of grants and loans.

The plan will also have six key missions, which include digitalisation and innovation, green transition, health, sustainable infrastructures, education and research, social and territorial inclusion.

“A significant portion of the Recovery Plan will be destined to female employment,” said Italian Prime Minister Giuseppe Conte on Wednesday, adding that while 40% of the Recovery Fund will go towards a green transition, 20% will be directed towards digitalisation. Reforms of the fiscal and judiciary systems are also part of the plan.

Spain will receive a total of €140 billion, to be transferred to Madrid within in the next three years, of which around €72.7 billion will be transferred in direct payments, while around €66.3 billion will come in the form of loans and credits, according to sources close to the socialist government. The rest will come from cohesion funds and the fund to support the decarbonisation of EU regions, among other sources.

The government’s priorities include the boosting of a green sustainable economy, digitalisation of the economy, creating and improving new transport infrastructures, creating new jobs with “added value”, promoting investments in research and new technologies and building resilience in cases crises such as the COVID-19 happen again.

‘BY THE BOOK’ AND ON TIME

Croatia’s National Recovery Plan will focus “on the green and digital transition of society, but will also cover other areas,” Foreign Minister Gordan Grlić-Radman has confirmed, adding that this will be done “based on the guidelines of the European Commission.”

Regional Development and EU Funds Minister Nataša Tramišak confirmed on 7 October to the state radio that “first €800 million from the European Fund will arrive early next year”.

These funds are intended for the economy, job preservation, liquidity and incentives for the development of the manufacturing industry.

“If the amount of grants available [in the case of Croatia it is about €6 bn] is not sufficient to finance the proposed reforms and investments, the state may request additional funds in the form of loans,” the minister added.

Greece too has said it will follow European Commission guidelines on the allocation of grants from the Recovery Fund “by the book”. While the Greek government promised to have its national plan ready by 15 October, government sources told EURACTIV.gr that at least one month is still needed.

For now, up to 35% of the funds will be allocated to green projects and at least 20% will go towards digital transformation projects.

With regards to remaining projects, the government is still internally debating what funds are to be made available immediately. Still, it appears that most of the funds will go towards a building renovation scheme for both private and public buildings, including funds for energy saving (including smart home equipment and chargers for electric vehicles) and digital/IOT equipment on electricity and water consumption.

The government has finalised the work concerning the list financed by grants of the Recovery and Resilience Facility, but will only be developing the loans’ part later – only a call to energy companies has been made for Just Transition loans on investments in two regions.

Prime Minister Andrej Babiš handed the Czech Republic‘s plans to European Commission’s President Ursula von der Leyen on Thursday right before the EU summit and without it having been approved by the government first, despite long discussions among cabinet members on Wednesday. Business associations have also criticised the drafting procedure more generally, claiming the plan has not been properly discussed.

While the plan focuses on infrastructure and green and digital transformation of the public and private sector, some parts of the projects included in the plan are not focused on economic recovery but investments in sectors that have been neglected for a long time, especially in the public sphere.

Babiš said the Czech Republic wants to draw money from the EU Recovery fund as soon as possible, meaning it wants the plan approved soon, though since the Czech Republic has been opposing the idea of loans from the EU budget, it is thus expected to only use grants.

According to the first draft of Portugal’s national plan, delivered on Thursday in Brussels by Prime Minister António Costa, the areas of social vulnerability and productive potential and employment are those to which the executive will allocate more community funds, totalling €5.6 billion (respectively €3.1 billion and €2.5 billion).

This involves a total of €13.9 billion in outright grants (at current prices) that the country can raise through the new EU Recovery Fund.

The Portuguese government is considering using loans to make investments of €4.3 billion in affordable public housing, business support and railway rolling stock, as said on Thursday. Read more here about the Portuguese priorities.

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Romania’s government prepared a national plan for economic recovery even before the European Council’s blessing of the future budget.

It does not exclude taking loans, and the investments listed are the ‘usual suspects’, which include transport infrastructure, energy and healthcare, while the listed priorities include digital transformation, the Green Deal, but also the Common Agricultural Policy (CAP) and the Cohesion Policy. Read more about Romania’s priorities here.

LATE SUBMISSIONS AND GLITCHES

Several member states already announced they will be late in submission.

Austria said it will only hand in its concrete recovery plan proposal by 30 April, making it one of the latest. According to Austria’s finance ministry, the plan will broadly follow the priorities set out in its national budgetary framework, meaning it would cover investments in climate protection measures, train infrastructure and education.

Sweden’s finance ministry has named the recovery fund priority areas as green transition, health and social policy, labour market training and regional cohesion – with digitalisation as a horizontal dimension.

A technical-level meeting between the Swedish side and the Commission will take place on 21 October. A full draft will be submitted in January, after the budget for 2021 has been adopted by the parliament.

In Finland, the plans are still in progress. Parliament has been far too busy with the COVID-19 situation and negotiations and gathering proposals from business, the industrial sector and labour unions for the national plan to be underway. Read more about Finland’s priorities here.

Poland’s economy, labour and technology ministry announced in September the country’s national recovery plan, saying it would focus on building a digital and environmentally friendly economy that can resist future crises and be financed by both grants worth €23.1 billion and loans worth €34.2 billion.

However, while the plan’s roadmap is set to be submitted to the Commission by the end of 2020, specific information about the 1,198 projects submitted on 7 October was lacking.

Still, the projects are linked to energy, environment, transport, infrastructure, health, society, digitalisation and territorial cohesion.

Slovakia’s finance ministry unveiled recently a document authored by experts with a list of reforms in eight areas: fiscal reform, green economy, employment, education, research, health, public administration and digitalization.

Very shortly it became clear that there is no political consensus in the governing four-coalition on exactly which reforms should be reimbursed with almost 6 bn of grants allocated for Slovakia. Thus, they will be picked and put together by each coalition party. When this process should be concluded, is unclear.

Slovakia does not plan, for the time being, to make use of the loans from the Recovery plan worth €6,7 billion. The reasons are unclear benefits and limitations in the use of the loans.

Bulgaria will feature about 60 for now unspecified projects in its national recovery plan, of which  €10 billion are to be funded by the EU Recovery Plan though these should still be of “the highest quality and highest added value”, according to the latest draft submitted to the country’s parliament by Deputy Prime Minister for EU Funds Tomislav Donchev.

The plan should be presented to the European Commission “by the end of this year or the beginning of next,” Donchev confirmed.

(Alexandra Brzozowski, EURACTIV.com | Alessandro Folli, EURACTIV.it | Zuzana Gabrisova, EURACTIV.sk | Philipp Grüll, EURACTIV.de | Fernando Heller, EuroEFE.EURACTIV.es | Theodore Karaoulanis, EURACTIV.gr | Sarantis Michalipoulos, EURACTIV.com | Monika Mojak, EURACTIV.pl | Louise Rozès Moscovenko, EURACTIV.FR | Bogdan Neagu, EURACTIV.ro | Krassen Nikolov, EURACTIV.bg | Margarida Pinto, Lusa.pt | Željko Trkanjec, EURACTIV.hr | Pakka Vanttinen, EURACTIV.com | Aneta Zachová, EURACTIV.cz)

In others news from the Capitals:

BERLIN

Accommodation bans overturned in three states. Three German states were forced to rescind their accommodation bans on Thursday after courts decided that hotels and other accommodation in Saxony, Lower Saxony, and Baden-Württemberg will no longer be able to prohibit stays of travellers from high-risk areas within Germany.

This comes after state leaders and the federal government were unable to reach an agreement on this controversial measure. Critics say that the regulations would be a waste of the country’s testing capacity and do not address the root causes of the recent increases in infections.

(Sarah Lawton | EURACTIV.de)

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PARIS

Government officials under investigation for COVID-19 (mis)management. The homes and offices of Health Minister Olivier Véran and Health Director-General Jerome Salomon were searched Thursday morning as part of an investigation into the government’s management of the COVID-19 health crisis, initiated in early July by the court in charge of trying ministerial misconduct. Read more.

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VIENNA

First districts marked red. Austria’s national COVID-19 “traffic-light” system, which compares the level of COVID-19 infections at the regional level, has started marking areas red for the first time. These include the Tyrolean capital Innsbruck plus surrounding, Wels and Hallein. One cit, Kuchl in Hallein, has been ordered to lockdown. The change of colours came with a sharp rise in new infections and will be followed by stricter measures in these regions that are yet to be determined. (Philipp Grüll | EURACTIV.de)

UK AND IRELAND

LONDON

Fading hopes. British Prime Minister Boris Johnson will set out his approach to Brexit on Friday after his chief negotiator described the EU’s latest demands in trade talks as disappointing and surprising. The prospects of an EU-UK trade deal being agreed imminently faded on Thursday after EU leaders took an uncompromising approach on the progress of talks. Read more.

Read also: Hopes of Brexit trade deal fade as EU leaders take hard line

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DUBLIN

No movement on Brexit talks.  Taoiseach Micheál Martin expressed his frustration at the lack of progress in the ongoing EU-UK trade negotiations. Read more.

NORDICS

HELSINKI

Populist Finns Party most popular among young people. The Finns Party is currently the most popular among the young generation between the age of 15 and 29, a recent survey published this week has revealed. If parliamentary elections were held now, the populist and nationalist party would obtain about 19% of the votes. Read more.

VISEGRAD

WARSAW

Top lawyer critical of Polish govt arrested. Poland’s anti-corruption police on Thursday arrested high-profile lawyer, Roman Giertych, involved in cases against the ruling Law and Justice (PiS) party on suspicion of money laundering, officials said. The move prompted outrage from government critics. Read more.

Read also: Poland and Hungary score against Commission over taxes

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PRAGUE

Czechs drop opposition to 2030 climate goal. The Czech Republic said it was ready to back the EU’s proposed 2030 target to cut greenhouse gas emissions by 55%, provided that the objective is a collective one and that EU state aid rules do not hamper its nuclear ambitions. Read our full network story.

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BUDAPEST

Migrant blockade. Hungary has already built 10 km of an underground blockade on the border with Serbia to prevent the arrival of migrants, reported hvg.hu. Its location, the type of obstacle that will be used or how deep it will go were not reported, however.

This comes after the first underground tunnel was found at the end of last year and several narrow passages that went under a double row of wires securing the Hungarian border were discovered. (Željko Trkanjec | EURACTIV.hr)

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BRATISLAVA

No clear position on emission reduction ahead of the summit. Slovakia will not yet commit to a concrete emission reduction target, Slovak Prime Minister Igor Matovič told members of European Affairs Committee of the parliament, adding that the European Council still had “two months left” to discuss the matter. (Zuzana Gabrižová | EURACTIV.sk)

NEWS FROM THE BALKANS

ZAGREB

Was the PM a target? Croatian Prime Minister Andrej Plenković said it should be looked into whether he personally was the target of Monday’s attack carried out in front of the government building in St. Mark’s Square, adding the attacker had been encouraged by the atmosphere in society created by hatemongers. Read more.

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In other news, Economy Minister Tomislav Čorić said Croatia could become one of the leading destinations for the development of solutions based on artificial intelligence.

“Some things and issues that are important for the development of artificial intelligence in Croatia have already been defined by laws, however, there is still a lot to do, including completing a national plan for the development of AI, drafted in 2019,” said Čorić, adding he believes this will happen in the next few months. (Željko Trkanjec | EURACTIV.hr)

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LJUBLJANA 

Janša vs national press agency. The Slovenian Press Agency (STA) has expressed indignation at Prime Minister Janez Janša’s tweet in which he described the agency as a “national disgrace, an evident abuse of the name it carries”. Read more.

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BELGRADE 

Debate as to whether Putin will come to Serbia. Russian President Vladimir Putin will not be coming to Belgrade in October, although President Aleksandar Vučić announced the visit in June, following their meeting in Moscow, the Danas daily reported on Thursday. Reasons involve Belgrade’s foreign policy trends. Read more.

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SARAJEVO 

No recognition for Kosovo. Bosnia and Herzegovina’s presidency did not find consensus on recognition of Kosovo, said Milorad Dodik, a Serb member of the presidency. Bosniak member Šefik Džaferović also said there is no decision on Kosovo. While no information about voting on Kosovo could be found on the presidency website, information on the presidency’s statement on Bosnia and Herzegovina’s EU path was available. (Željko Trkanjec | EURACTIV.hr)

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PODGORICA 

Path to EU has no alternative. Montenegrin parliament Speaker Aleksa Bečić said Montenegro’s journey to the EU had no alternative during his meeting with Croatian Ambassador to Podgorica, Veselko Grubišić. The ambassador was quoted as saying that Croatia would continue providing support to Montenegro in the further process of its European integration. Croatia finds it important for Montenegro, as a reliable NATO member, to continue striving towards the EU, Grubišić said. (Željko Trkanjec | EURACTIV.hr

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[Edited by Alexandra Brzozowski, Daniel Eck, Zoran Radosavljevic]

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