THE NEW ECONOMIC RECOVERY PLAN FOR EUROPE – NEXT GENERATION EU
Publicat pe 31/07/2020
The crisis caused by the coronavirus pandemic has profoundly affected the European and global economy. These radical changes have determined the European Union (EU) to react by proposing measures to mitigate the negative impact on EU Member States (MS). Following the measures proposed by the EU in March and April, in order to minimize the financial and social impact caused by the pandemic, the European Commission (EC) presented on May 27 an ambitious recovery plan for Europe based on the full capitalization of the Union budget.
In order to mobilize the necessary investments, the Commission has presented both the new recovery instrument – Next Generation EU – with a budget of 750 billion Euro and the revised proposal of the long-term EU budget for 2021-2027, of 1100 billion Euro. Shortly, EC will provide the Member States with a total budget of 1850 billion Euro over the next 7 years.
The Next Generation EU tool will contribute to a sustainable and prosperous recovery that will accelerate the transition to a green and digital Europe. It will be invested in the MS through three pillars – 500 billion Euro in grants and 250 billion Euro in loans.
The first pillar – supporting Member States with investment and reforms through:
- Recovery and resilience facility, with a budget of 560 billion Euro, will support Member States to implement investments and reforms that are essential for a sustainable recovery. MS will design their own tailored national recovery plans, based on the investments and reforms priorities identified as part of the European Semester, in line with National Climate and Energy Plans, Just Transition Plans and Partnership Agreements and Operational Programs under EU funds.
- REACT-UE will provide a top-up for cohesion support to Member States, with a budget of €55 billion Euro. This will be available from 2020 and will support workers and SMEs, health systems and the green and digital transitions.
- To support the green transition, the Commission is proposing to provide additional funding, up to 40 billion Euro, for the Just Transition Fund to support MS in accelerating the transition to climate neutrality, facilitating professional retraining of workers, creating new opportunities for SMEs and investing in the transition to a clean energy and a circular economy.
- The reinforcement of the European Agricultural Fund for Rural Development with a budget of 15 billion Euro will support rural areas in making the structural changes necessary in line with the European Green Deal and implement the ambitious objectives of the strategy ”From farm to fork”.
The second pillar – The relaunch of the economy by stimulating private investments aims to support private companies by:
- A new Solvency Support Instrument will mobilize private resources to provide urgent support to otherwise healthy companies. Investment will be channeled to companies in the sectors, regions and countries most affected. This will help to level-up the playing field for those Member States who are less able to support through State aid. It can be operational from 2020 and will have a budget of 31 billion Euro, aiming to unlock more than 300 billion Euro in solvency support. Guidelines will be developed to help align investments towards EU priorities.
- The Commission is proposing to upgrade InvestEU, the EU’s flagship investment program, more than doubling its capacity. In addition, a Strategic Investment Facility will be created within InvestEU. It will be able to unlock 150 billion Euro of investment thanks to the 15 billion Euro put into it by Next Generation EU. This will invest in strengthening our resilience and strategic autonomy across key technologies and value chains.
The third pillar – is about learning the lessons of the crisis and refers to:
- The new health program – EU4Health – to help equip Europe against future health threats with a budget of 4 billion Euro.
- Reinforcing rescEU and the EU’s Civil Protection Mechanism, to respond to large-scale emergencies with a total budget of1 billion Euros.
- Supplementing the Horizon Europe program with4 billion Euro, which will be strengthened to fund the vital research in health sector.
- Supporting Europe’s global partners with an additional 5 billion Euro for external actions, including humanitarian aid.
FINANCING THE RECOVERY PLAN
The Next Generation EU will collect funds by temporarily raising its own resources ceiling to 2.0% of EU gross national income, allowing the Commission to use its strong credit rating to borrow 750 billion Euros from financial markets. Thus, in order to facilitate the reimbursement of funds collected from the market and to contribute more to reducing the pressure on national budgets, the Commission will propose, in addition to its own resources proposed in 2018, new additional own resources, such as: taxation of digital services, taxation of financial transactions, revenues from the emissions trading scheme, fee for plastics and a border adjustment mechanism for carbon dioxide emissions.
In addition, in order to make the funds available as soon as possible in order to respond to the most urgent needs, the Commission proposes to amend the current Multiannual Financial Framework 2014-2020 to make available additional funding of 11.5 billion Euro in 2020.
All funds collected through the EU’s Next Generation Instrument and the new EU budget will be channeled through EU programs to a number of objectives that will ultimately stimulate green and digital transition – necessary for the EU’s economic recovery:
- The European Green deal – a new growth strategy
In order to achieve the objectives proposed in the European Green Pact, the following will be pursued: renovation and modernization of critical buildings and infrastructures in Europe; creation of 1 million green jobs by making the transition to a circular economy; implementation of the strategy ”From Farm to Fork”; and retraining of workers, supporting SMEs in regions that rely on the fossil fuels value chain, using the funds foreseen in the Just Transnistion Fund.
- A deeper and more digital Single Market
Europe will invest more to improve its connectivity and strengthen its industrial and technological presence, in order to increase its strategic capacity. A digital economy is essential in the EU’s efforts to innovate and create jobs.
- A fair and inclusive recovery
Following the crises caused by the Covid-19 pandemic, the EU has developed SURE instrument worth 100 billion Euro, which provides temporary support to workers and businesses to mitigate the risk of unemployment in emergency. Also, the Commission will step up its fight against tax evasion to help Member States generate tax revenue.
- Constructing a more resilient Union
The sanitary crises determined the European Union to adopt a series of measures aiming to strengthen the community bloc. Thus, it was proposed to strengthen the rescEU reserve in order to increase the EU’s permanent capacity to manage all types of crises; developing a pharmaceutical strategy to increase the production capacities and thus to ensure Europe’s strategic autonomy. An action plan on critical raw materials to strengthen the internal market will be also created. In addition, the EU will review trade policy to ensure the continuous flow of goods and services worldwide and strengthen the examination of foreign direct investments.
Shortly, the European Commission aims to ensure the digital transformation and the transition to a green and strong European economy.
WHAT IS THE AMOUNT THAT ROMANIA WILL BENEFIT OF?
According to the EU’s Economic and Social Recovery Plan, out of a total amount of 750 billion Euro, Romania will receive 33 billion Euro – of which 19,62 billion euro are non-reimbursable funds – money that we will have to absorb by 2023. Thus, about 26 billion Euro will be accessible, in the form of grants and loans, through the Recovery and Resilience Mechanism, money that will be dedicated to investments and reforms in green and digital fields. Approximately 1.5 billion Euro represents additional grants for the implementation of Cohesion Policy in 2020-2022, which will be distributed through REACT EU and 1.3 billion Euro (grants) – additional funds for rural development. In addition, through the Just Transition Fund, Romania will receive additional 4.4 billion Euro, money dedicated to the professional retraining of workers in fossil fuel-based industries, the creation of new opportunities for SMEs, as well as investments in the transition towards a clean energy and a circular economy.
According to the European Commissioner Adina Valean, the majority of the non-reimbursable funds from the Next Generation EU instrument will be allocated based on the needs resulting from the country report. Based on the EU country specific recommendations, Romania must carry out reforms and investments with priority in the following areas: health, education, transport and digital infrastructure. Thus, by April 2021, Romania will have to present to the European Commission a country plan that includes viable reform and development projects for financing from the Next Generation EU instrument.
Also, an important issue that is discussed in the European institutions concerns the conditionality of accessing European funds to respect for the rule of law, a principle that could enter into force on January 1, 2021.
In addition to the 33 billion euro that Romania can receive from the Economic Recovery Plan, it will also benefit from over 40 billion Euro out of the amount of 1100 billion Euro allocated for the future EU budget (2021-2027). Thus, Romania could be among the top seven beneficary states of the European budget. It is important, however, that this amount of over 70 billion Euro be used efficiently, to be invested in priority sectors, to generate added value and ultimately strenghten Romania’s economy.
The distribution and spending of funds allocated through the Next Generation EU instrument is unclear and is being debated in the European institutions, but based on the European Union’s priorities for 2021-2027 and the European Commission’s recommendations in the Country Report on Romania for 2020, the national authorities will have to put forward projects that stimulate mature public investments and promote private investments.
Thus, in order to encourage economic recovery at national level, it is important for Romania to relaunch public infrastructure works in areas such as: sustainable transport, modernization of railway infrastructure, energy efficiency, environmental infrastructure, especially in field of water, and digital services. Also, on the European Commission’s recommendation and in accordance with the objectives of the European Green Deal, Romania will have to take measures for waste management, as the recycling of municipal waste is done at a very low level. Investment projects in the production and use of clean energy will also be needed, as well as for the conversion of high-carbon mono-industrial regions.
Shortly, it is recommended that the Romanian authorities submit to the European Commission a country plan that includes infrastructure investment projects (environmental, highways and railway lines), for the modernization of public transport (purchase of electric buses, development of a network of electric car charging stations), renewable energy and energy efficiency projects, projects for the digitization of public services, as well as funds to support SMEs to overcome economic difficulties.
WHAT ARE THE NEXT STEPS?
Following the presentation of the Economic Recovery Plan and the European Unions’s long-term budget proposal to the European Parliament, the European Commission called on the European Council and its co-legislators to swiftly examine these proposals, in order to reach a political agreement at European Council level.
The Commission will then work closely with the European Parliament and the Council to finalize an agreement on the future framework and related sectoral programs. Completing these steps in early autumn would mean that the new long-term budget could become operational on January 1, 2021, thereby facilitating the recovery of Europe.
Comisia Europeană, Un plan de redresare pentru Europa: https://ec.europa.eu/info/live-work-travel-eu/health/coronavirus-response/recovery-plan-europe_ro
Reprezentanța Comisiei Europene în România, Acum este momentul Europei: să reparăm prejudiciile aduse de criză și să pregătim viitorul pentru noua generație https://ec.europa.eu/romania/news/20200527_next_generation_eu_ro
Raportul de țară din 2020 privind România: https://eur-lex.europa.eu/legal-content/RO/TXT/PDF/?uri=CELEX:52020SC0522&from=EN
România va beneficia de aproximativ 33 miliarde de euro prin instrumentul Next Generation EU. Află cum este repartizată suma: https://www.fonduri-structurale.ro/stiri/24115/romania-va-beneficia-de-aproximativ-33-miliarde-de-euro-prin-instrumentul-next-generation-eu-afla-cum-este-repartizata-suma
Bogdan Neagu, Next Generation EU: Comisia Europeană propune un plan de relansare economică de 750 miliarde de euro, Euractiv, https://www.euractiv.ro/eu-elections-2019/next-generation-eu-comisia-europeana-propune-un-plan-de-relansare-economica-de-750-miliarde-de-euro-19236
Cristian Ștefănescu, Zeci de miliarde de euro așteaptă România la Bruxelles, Deutsche Welle, https://www.dw.com/ro/zeci-de-miliarde-de-euro-așteaptă-românia-la-bruxelles/a-53623217