Since March 2020, Covid-19 Pandemic has been damaging many aspects of our society. The economic sector is for sure one of the fields that suffered the most from the overall crisis. This is especially due to the multiple lockdowns undertaken by countries to limit the propagation of the virus, which has led to the decrement of tourism and the stalling of many economic activities. For this reason, the European Union has developed some instruments and funds in order to speed up the recovery of national economies.
Among the most recalled economic instruments projected to relaunch national economies of its members, we find the Next Generation EU and the Recovery Plan. But what are exactly these recovery tools and how do they work?
The Next Generation EU is a recovery instrument worth €750 billion, and the term Recovery Fund is nothing more than a synonym of it. It will help repair the economic and social damage caused by the coronavirus pandemic and create a more sustainable and resilient Europe. The Next Generation EU has been defined as a “temporary instrument” to respond to the economic crisis provoked by the COVID-19 pandemic. As Ursula von der Leyen said, this temporary tool, “will sit upon” the MFF (Multiannual financial framework), a long-term EU budget of €1.1 trillion.
At the heart of the Next Generation EU, there is The Recovery and Resilience facility (facility) which will supply €672.5 billion in loans and grants, to support reforms and investments that will be undertaken by the member states.
The remaining €75.5 billion will mainly promote:
-Climate and digital transitions through the “Fair Transition Fund” and the “Digital Europe programme”;
-Preparedness, recovery and resilience, thanks to the “rescEU”, the “recovery and resilience” device and a new “Eu4health” health programme;
-the modernisation of traditional policies, such as cohesion policy and the common agricultural policy, in order to optimise their contribution to the Union’s priorities;
-the fight against climate change, which will receive 30% of the funds (the highest percentage ever for the EU budget);
-the protection of biodiversity and gender equality;
The Recovery plans, or national recovery and resilience plans, are instead plans of national reforms and investments. Since these recovery and resilience plans will represent how the funds of the Next Generation EU will be spent by each European member, the national reforms to be implemented will have to be in line with its main purposes – sustainability, resilience, digital transition and economic growth.
Each member state will be required to present their national reform programs and their recovery and resilience plans to the European authorities within the 30th of April. Then, the European Council will have to approve the national policies presented. The funds, however, will be granted to each nation only in case they will be able to fulfil them within 2026.
To implement the recovery plans proposed by the Commission and raise the €750 billion, the members of the European community have decided to issue a common debt on the financial market, an unprecedented event in the history of the European Union.