An €800 billion European Union programme set up to fund the bloc’s “green” and digital transitions has been held up by red tape, with fewer than a third of the money being disbursed.
The EU’s NextGen recovery fund, approved in December 2020, began operations in 2021. It is similar to the US Inflation Reduction Act, only “very, very difficult” to access, according to Jean-François van Boxmeer, head of the European Round Table for Industry, an EU advisory group.
Alfonso Ricciardelli, an EU political risk analyst and start-up founder, told Brussels Signal: “To get these funds, governments need to put forward a national plan, amending it accordingly when needed, which also includes trade-off structural reforms.”
The “abundance of red tape is supposed to be a safeguard so that EU money does not go to waste, which inevitably happens”, he added.
Referring to Northern Europe, he said: “Some countries, guess which ones, thought the controls were not even strong enough.”
The NextGen fund was seen as a landmark of Ursula von der Leyen’s European Commission presidency. It also involved a new funding philosophy, where countries are reimbursed not for their expenses but for achieving outcomes identified in the plan.
The shift was as a response to Northern European countries pushing back on the fund, “which they saw as a Trojan horse for the mutualisation of European debt”, according to Lewis McLellan of the Official Monetary and Financial Institutions Forum (OMFIF) a think-tank.
Italy is a case in point, with an historically low uptake of EU structural funds “because it never manages to put forward projects that are deemed worthy of getting funded by the EU”, Ricciardelli added.
He added that the government of then-Italian prime minister Giuseppe Conte, in office until February 2021, did put together a proposal for NextGen funding for an “ambitious agenda of government-funded climate transition and support for tech infrastructure”.
Current Prime Minister Giorgia Meloni’s “more traditional Conservative Government” then decided to “switch to tax cuts and incentives to the private sector and more traditional infrastructure” and “slashed the more ambitious but harder to attain programmes”, Ricciardelli said.
Also, he added, “on Italy, I heard Brussels was fuming but could not withhold approval for political reasons”.
“Which is, incidentally, exactly what Northern countries were afraid of at the inception.”
The fund, often seen as a precursor to US President Jo Biden’s Inflation Reduction Act, began as a recovery package to help Member States recover from the Covid pandemic.
Then, quite quickly, it acquired more goals: the green transition, digital transformation, modernisation, inclusive growth, social cohesion and education and skills for the next generation now make up just part of the fund’s official objectives.
The EC estimated at the start that, if fully implemented, the NextGen fund could increase the level of real GDP in the Eurozone by up to 1.5 per cent by 2024.
Yet, despite its grand claims, the fund is “macroeconomically irrelevant”, argued former Financial Times associate editor Wolfgang Münchau.