European Commission President Ursula von der Leyen in April 2020. OLIVIER HOSLET / AFP
“European funds should serve as a carrot to launch ambitious structural reforms that would not normally go ahead. In the summer of 2020, when the European recovery plan was drawn up for an unprecedented sum of more than 723 billion euros, several countries – above all Austria – pleaded for the payment of subsidies and loans that are linked to conditions. It is this line that has prevailed: in order to get its share, each country has to justify to the European Commission that it has implemented reforms and achieved certain goals.
These conditions are designed to ensure the plan delivers on what it promises: to build a more economically and environmentally resilient Europe, while helping the most vulnerable countries catch up. But there is still room for interpretation. Commitments are more or less ambitious depending on the country and are not always kept.
Two and a half years after laying the groundwork for the plan, the European Commission faces a dilemma. Should we demand strict application of the roadmap, even if it means freezing tens of billions of euros? Or compromise on targets at the risk of undermining the expected effects of the stimulus? The European collective recovery files, of which Le Monde is a member, initiated by the independent Dutch platform Follow the Money (“Follow the Money”), investigated these negotiations.
Recovery Files: Examining European Recovery Funds
723.8 billion euros: The recovery and resilience plan launched in 2021 is the largest sum ever released by the European Union. These loans and grants aim to revitalize the continent’s economy, which has been rocked by the crisis caused by the Covid-19 pandemic, with the stated aim of creating a “greener” Europe, “better adapted to current and future challenges”. .
How was this plan developed? How is the money spent? The Recovery Files collective, of which Le Monde is a partner, aims to investigate the many public interest issues raised by the use of these colossal loans. Launched by the independent Dutch platform Follow the Money, this project brings together editors from across Europe with the support of the IJ4EU (Investigative Journalism for Europe) fund.
“Goals and milestones” not always ambitious
The goals of the recovery plans submitted by the Member States are presented as “Targets and Milestones”, a term that summarizes support programs and reforms. An inventory of the commitments made with supporting documents must be attached to each request for payment sent to Brussels. Overall, the European Commission must assess compliance with more than 5,000 “Targets and Milestones” by 2026 in parallel with the release of funds.
In the summer of 2021, after validating its plan, France received a first subsidy tranche of 5.1 billion euros out of the 40 billion requested in Brussels. Then, on March 4, 2022, she received a second payment of €7.4 billion after justifying the fulfillment of her 38 commitments for 2021. At the level of 27, as of January 2023, 94 of the 338 billion planned in grants have been disbursed, as have 45 of the 386 billion in loans.
Several states advocated including reforms that have already been implemented in the “goals and milestones”.
Behind these numbers, the ambition of the goals is variable. This was also discussed during the negotiations ahead of the launch of the recovery plan in summer 2020. According to a 250-page document summarizing these negotiations, published by Brussels in response to a request for access to Follow the Money’s administrative documents, several states such as France, Cyprus or Hungary spoke out in favor of including reforms already implemented in the “Objectives and Milestones”. For Paris, it was necessary to prevent states from delaying certain reforms just to make them targets of the plan.
For this reason, the reforms already implemented are included in the commitments of the recovery plan presented by France in April 2021. For example, the new method for calculating personal housing allowance (APL) appears there, while it was introduced for the previous January 1st.
At least seven Member States have already implemented “commitments” in their plans. For example, they represented 23 of the first 37 goals of the German plan and half (13 out of 26) of the first commitments of the Dutch plan.
Another big trick: include in the national plans transpositions of European directives into national law or objectives linked to these European commitments which, in principle, should have been adopted anyway. According to our count, this did not prevent at least eight countries (Bulgaria, Croatia, Cyprus, Italy, Lithuania, Romania, Slovakia and Spain) from using it. Rome has therefore included an air pollution control program in its plan until the end of 2021. However, this was already imposed on him by a European directive from 2016, which Italy should have complied with from April 2019.
Take action or compromise?
Other objectives, on the other hand, prove to be much more difficult. The federal government has therefore planned to invest 712 million euros in its plan to support research into vaccines against Covid-19. The goal was to have two vaccine candidates backed by these funds approved by the European Medicines Agency by no later than the third quarter of 2021. BioNTech had already approved one of its own at the time, but German rival CureVac hoped to propose a second. Except that the company ended its vaccine project at the end of 2021. A snub for CureVac, but also for Berlin: Since this goal is not achieved, the European Commission is entitled to cut the funds granted to Germany.
Requests for payment in Brussels do not necessarily correspond to the amounts promised by the states
At this stage no clear rules were established to resolve situations of this type. Firstly, because the requests for payment in Brussels do not necessarily correspond to the amounts promised by the states – for example, you can ask for EUR 1 billion to fund measures that in reality cost EUR 0.9 billion or EUR 1.1 billion. Then, because it may be understandable that not all of the plan’s objectives will be achieved. Outcome: The European Commission discusses with the Member States on a case-by-case basis.
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The European Court of Auditors criticized this situation in a report published in September, arguing for a clear methodology to calculate payment cuts for missed targets so that each state is treated fairly. Questioned by our Follow the Money partners, the commission makes sure to prepare a installment payment method that follows their recommendations without giving a specific deadline.
increasingly difficult to achieve
The obstacle seems to have been circumvented so far. Only 11 of the 27 Member States have already received EU funding linked to the achievement of their ‘objectives and milestones’. Some are playing for time like Belgium, which needs to reform pensions to get European credits. The French government has avoided this pitfall: its pension reform project is mentioned in the recovery plan, but is not part of the formal commitments that condition the subsidies.
Also read: Is French pension reform really dictated by Brussels?
Poland and Hungary are also under scrutiny, with both countries needing to resolve crucial rule of law issues to unlock payments. But they are not the only ones. In December, Romania submitted a payment request. Brussels must assess whether the 2019 Whistleblower Protection Directive has been correctly transposed into Romanian law before the credits are released. However, the law passed in Bucharest has met with criticism. “We believe it offers a low level of protection compared to existing legislation,” says Laura Stefan, anti-corruption expert at the Expert Forum think tank in Bucharest.
The question will eventually catch up with the majority of European countries because the complexity of the obligations will increase. “The most difficult ‘goals and milestones’ are planned for the years 2025 and 2026,” states David Bokhorst, associate researcher at the European University Institute in Florence, at the end of the recovery plan. Portugal, for example, has planned to enroll around 800,000 people in a digital education program by the third quarter of 2025. “That’s 8% of the country’s total population,” notes Mr. Bokhorst. How can it be ensured that as many people as possible attend these courses? And how will the quality of these programs be? »
Apart from purely budgetary considerations, this situation raises questions about the purpose of European loans. What remains in 2026? The recovery plan will be judged more on its grand economic and environmental ambitions than on its close adherence to its 5,000 goals and milestones.