«The Commission is proposing a 750 billion Recovery Fund which is added to the common instruments already launched. A European turning point to face an unprecedented crisis ». EU Commissioner Paolo Gentiloni reveals the first figures on the Recovery Fund proposed by the European Commission linked to the next EU budget 2021-2027 which will be worth 1,100 billion. The Brussels plan aims to intervene in three areas: support for the recovery of states, help private investment and prepare for new crises (strengthening health systems, research programs, etc.). In other words, investing in a green, digital and resilient Europe. To achieve these objectives, each of the three pillars is equipped with a series of tools that make available loans, in the form of loans and grants: 500 billion would be allocated to allocations (grants) to the countries and sectors most affected by the economic impact of coronavirus, while the other 250 billion would be reserved for loans to Member States. The share of funds for Italy amounts to 172.7 billion euros, of which 81.807 billion would be paid as non-refundable aid and 90.938 billion as loans.
Support to States
The main tool to help the recovery of the member states is the Recovery and Resilience Facility, which provides financial support for investments and reforms to accelerate the recovery and make the economies of the EU countries more resilient and prepared for the future. To access these funds, governments must present National Recovery Plans which must be in line with the objectives of the European Semester (therefore with the Country-specific Recommendations published last week by the Commission), with the Energy and Climate Plans and EU programs . Then there is a second instrument called “React-Eu” which will intervene through cohesion policy to bring aid to the territories, regions, cities and public companies. Finally, two existing programs will be strengthened: the one on rural development and the Just transition mechanims, for a fair green transition.
The repercussions on Italy
The Commission had made four specific recommendations to Italy, asking for action on the health system; on the world of work to ensure adequate protection of workers, in particular the atypical, but also by putting active policies in place; reinforce distance teaching and skills, including digital ones; ensure the application of the measures that provide liquidity to the real economy, including SMEs, innovative companies and self-employed workers, and avoid late payments. In particular, we also ask to promote investments for recovery, with a focus on the green and digitalization: clean energy, research and innovation, sustainable public transport, waste management, and strengthening of the digital infrastructure. Fourth recommendation: improve the efficiency of the judicial system and the efficiency of the public administration. If you look at the sectors most affected, there are tourism, the automotive sector and transport. Italy in preparing the recovery plan to be submitted to Brussels for approval and therefore obtaining EU funds will therefore have to keep these areas of action in mind.
The second pillar aims to speed up recovery and boost private investment. The Solvency Support Instrument will make it possible to recapitalize businesses in difficulty due to Covid in all sectors. The guarantees will come from the EU budget and will be made available by the European Investment Bank (EIB) and national promotion banks. For Italy it is the CDP. The InvestEu program, a legacy of the Juncker Plan, will also be strengthened. The role of the CDP is growing and it will be able to manage the EU guarantees directly (in the past, it was always the EIB).
Coping with new crises
New programs will be created to make the EU stronger in the face of new crises and strengthen existing ones. The fields of action are health systems, research and innovation, the creation of health infrastructures to manage the emergency (protection stock, transport of medicines, etc.).
In order to finance the Recovery Fund, the Commission will go to the markets by issuing bonds that will be guaranteed by the next EU budget. To increase the firepower of the EU budget, the Commission proposes to intervene on the so-called headroom, the difference between annual commitments and the theoretical maximum of own resources (which per treaty is equal to the theoretical maximum of expenses), raising it by raising own resources.