Opinion of the European Committee of the Regions – Mid-term review of the post-COVID European recovery plan (Recovery and Resilience Facility)
Date: 2024-10-08
Institutions: Commission for Economic Policy, European Committee of the Regions
Subjects: EU Member State, EU energy policy, EU financial instrument, EU financing arrangements, economic recovery, economic reform, innovation, investment, reduction of gas emissions, structural adjustment








C_202407057EN.000101.fmx.xml












Official Journal of the European Union


EN
C series













C/2024/7057


4.12.2024






Opinion of the European Committee of the Regions – Mid-term review of the post-COVID European recovery plan (Recovery and Resilience Facility)
(C/2024/7057)














Rapporteur



:


Christophe ROUILLON (FR/PES), Mayor of Coulaines





Reference document



:


Communication from the European Commission: Strengthening the EU through ambitious reforms and investments

COM(2024) 82 final










POLICY RECOMMENDATIONS

THE EUROPEAN COMMITTEE OF THE REGIONS (CoR),








1.


welcomes the publication of the mid-term evaluation of the Recovery and Resilience Facility (RRF), in line with Article 32 of the RRF Regulation;












2.


stresses that, in the face of the crisis caused by the COVID-19 pandemic, the recovery fund has proved to be a major step forward both through borrowing and through the very rapid disbursement of EU funds. It has thus helped to limit the impact of the crisis on the European economy, in particular by helping to preserve the level of public investment through its pre-financing mechanism. However, centralising its management poses risks to the economic, social and territorial cohesion of the European Union in the medium and long term;












3.


considers that this joint response to an unprecedented crisis has served to restore confidence in the EU institutions and establish a powerful instrument of European solidarity;












4.


stresses that, due to the competition between the RRF and cohesion policy, which can cover similar objectives, the rapid disbursement of RRF funds has led to lower absorption rates in cohesion policy programmes. Indeed, projects eligible under cohesion policy have been ‘transferred’, as RRF-funded projects are subject to implementation rules that are more favourable as they do not need to be co-financed, for example. At the same time, the CoR regrets that this rapid RRF funding has sometimes led to windfall effects for projects that did not necessarily need European support;












5.


points out that the macroeconomic impact of RRF funding depends largely on the additionality of the projects financed and that better long-term results could be achieved by increasing the EU cohesion policy budget; reiterates, in this context, that the RRF is broken down on the basis of different distribution criteria from those applying to cohesion policy and it therefore does not have the same objectives and results in terms of cohesion, even though its legal basis is also Article 175 TFEU;












6.


welcomes the encouraging results of RRF funding in promoting the green and digital transitions, which are due to regulatory obligations setting strict minimum levels for the share of RRF investments that must be earmarked for these policies;












7.


supports the principle of ‘do no significant harm’ to green objectives, which was in the RRF and helps to reduce its environmental impact; also emphasises its support for the ‘do no harm to cohesion’ principle; regrets, in this regard, that the RRF does not fully respect the latter principle;












8.


welcomes the positive impact that the RRF appears to have had on unemployment rates, especially in southern European Member States, which were particularly affected by the pandemic; emphasises, however, that these results will need to be confirmed over time;





Involvement of local and regional authorities and cohesion









9.


points out that local and regional authorities are responsible for more than one third of public spending and more than half of public investment in the EU; stresses that, since the RRF aims to stimulate reforms and investments, local and regional authorities should be actively involved throughout the RRF implementation process, as recognised in recital 34 of the RRF Regulation;












10.


emphasises that local and regional authorities have not been sufficiently involved, or have not been involved at all, in the entire RRF implementation process; regrets, in this regard, that the RRF does not respect multilevel governance or the partnership principle, both of which apply to cohesion policy, thereby undermining the very principle of economic, social and territorial cohesion enshrined in the Treaties;












11.


points out that the latest CoR report on the state of cities and regions and its barometer revealed that nearly 44 % of the elected representatives surveyed stated that they were neither involved in nor informed about RRF-funded projects in their city or region; stresses that the centralised governance of the RRF has offered some national governments the opportunity to exclude certain cities and regions governed by elected members of opposition parties from the possibilities offered by the RRF for grants or European support;












12.


regrets that the effective contribution of the RRF to cohesion is only superficially addressed by the Commission’s mid-term evaluation, even though the promotion of economic, social and territorial cohesion forms the legal basis of the RRF Regulation, and social and territorial cohesion is one of the six pillars set out in Article 3 of the RRF Regulation;












13.


regrets that the contribution of the National Recovery and Resilience Plans (NRRPs) to Europe’s economic, social and territorial cohesion is very uneven; regrets, in this regard, that some plans do not contain any strategy at all to support cohesion; also points out that the RRF is by its nature much less redistributive than the Structural Funds due to the weighting of the unemployment rate in the formula for calculating national envelopes, leading some ‘cohesion countries’ to receive per-capita funding packages below the EU average;












14.


is alarmed that, in a survey conducted by the CoR and the Council of European Municipalities and Regions (CEMR), one third of organisations surveyed state that their national reform and resilience plan does ‘not at all’ effectively contribute to enhancing territorial cohesion;












15.


stresses that the independent mid-term evaluation report on the RRF shows very mixed results in terms of the promotion of territorial cohesion and highlights competition and substitution effects to the detriment of cohesion policy, as the RRF has been afforded a certain degree of priority; agrees, therefore, with the independent assessment that the lack of territorial dimension in the RRF runs counter to the aim of cohesion and risks increasing disparities within the Member States;












16.


believes that this is directly due to the top-down and centralised approach of most NRRPs and the lack of involvement of local and regional authorities; questions, therefore, the relevance of the legal basis of the RRF Regulation;





Operation, capacities and timing of the RRF









17.


notes that there are very significant differences in how the RRF operates compared with other EU instruments and programmes, especially the European Structural and Investment Funds (ESIF). Its payment system, for example, is based not on cost but on performance via the attainment of targets and milestones; stresses that, although performance-based funding may be useful for some instruments, the CoR opposes extending performance-based budgeting to cohesion policy programmes given that not all investments, especially social ones or those relating to the well-being of the public, can be measured solely on the basis of performance and targets or with a short-term approach; adds that, according to the European Court of Auditors’ report 26/2023, while the indicators developed within the RRF can be used to monitor progress in the implementation of the Facility, they cannot yet be used to assess the actual performance of the programme. The CoR is also concerned about the difficulties encountered by the European Commission in carrying out audits of the RRF;












18.


also believes that the rigidity of the NRRPs and the complexity of the amendment procedures (which, as with the adoption of the initial plans, require a Council implementing decision) are not suitable for cohesion policy given its long implementation period; considers, therefore, that a simplified procedure should be possible where plans require only minor changes, which would involve a more limited role for the Council;












19.


agrees with the independent mid-term evaluation report on the RRF, which stresses that the significant amount of RRF funds available in addition to cohesion policy has put pressure on the administrative and absorption capacity of ESIF managing authorities; takes note of the European Court of Auditors Report 13/2024 on ‘Absorption of funds from the Recovery and Resilience Facility: progressing with delays and risks remain regarding the completion of measures and therefore the achievement of RRF objectives’ and its main finding that the low absorption rate in some countries puts at risk the achievement of goals for helping EU countries recover from the COVID-19 pandemic and making them more resilient;












20.


stresses that, currently, only approximately one third of the RRF funds are used, which limits the functionality of the fund, meaning that local and regional authorities need more time to implement the RRF; strongly doubts, therefore, the capacity of the Commission, the Member States and local and regional authorities to collectively ensure the implementation of all the measures provided for in the NRRPs, and thus the disbursement of all funds before the instrument is scheduled to expire at the end of 2026; suggests, therefore, postponing the spending deadline for RRF funds and focusing more on social investments, in areas such as housing or health;












21.


proposes that a larger share of the uncommitted RRF funds be redirected towards the pillar for smart, sustainable and inclusive growth, to address the acute decline in EU competitiveness compared to its global competitors;












22.


underlines the importance of investments in renewable energy projects, such as wind, solar and geothermal, and stresses the need for adequate funding for sustainable urban mobility initiatives, such as the development of public transport, cycling infrastructure, and pedestrian-friendly city planning; furthermore calls for continuous support for projects supporting biodiversity and ecosystem restoration, so that cities and rural areas take a step forward in environmental sustainability and resilience in Europe;












23.


points out that some Member States that are the main beneficiaries of the RRF were already experiencing difficulties in absorbing structural funds before RRF funds were added; believes that a delay in the implementation of reforms and investments, if justified by objective factors, should not result in the loss of the European Structural and Investment Funds in question. This would, in many cases, be tantamount to further penalising Member States and local and regional authorities which have limited absorption capacity and which are often those with the lowest levels of development;












24.


considers that the new timetable for the implementation of the RRF, in the event that the RRF spending deadline is extended, should allow Member States to revise their NRRPs, and recommends that the Council should have the opportunity to ensure that extension requests are justified by objective factors;





The RRF and reforms









25.


stresses that, unlike cohesion policy, the main aim of which is to create more cohesion within the EU, the RRF was also linked to reforms;












26.


believes that reforms supported by the RRF must have their own democratic legitimacy, based on consultation, dialogue and a collaborative approach, including with local and regional authorities, to ensure ownership of these reforms;












27.


notes that the Commission’s positive assessment of the impact of the RRF on the implementation of reforms largely focuses on those put forward in the context of the country-specific recommendations during the European Semester;












28.


stresses that the independent mid-term evaluation refers to ‘varying interpretations of the word “reform” in NRRPs’; considers that the lack of a clear definition of eligible reforms within the RRF not only raises questions of additionality and transparency of funding, but also raises a subsidiarity issue;












29.


notes that, in its opinion on the proposal for a regulation, the CoR called for the term ‘reforms’ to be defined as measures which ‘(i) implement the objectives of the EU Treaty; (ii) contribute to convergence and the reduction of regional disparities, including the mitigation of structural territorial constraints, in the spirit of the legal basis of the Regulation, Article 175 of the Treaty on the Functioning of the European Union (TFEU); (iii) are able to trigger public investment and stimulate long-term sustainable and inclusive growth consistent with the Sustainable Development Goals’;





Future fiscal capacity instruments









30.


welcomes the fact that the European Commission has proposed a dedicated EU recovery instrument, as well as the implementation of the RRF and its key role in the European response to the COVID-19 crisis in the short and medium term; considers that this first large-scale European performance-based instrument highlights both the advantages and disadvantages of such an approach;












31.


calls for the next RRF annual report to include a thematic analysis of the involvement of local and regional authorities on the basis of the summaries provided for in Article 18(4)(q) and, due to its legal basis, a qualitative and detailed assessment of the RRF’s contribution to economic, social and territorial cohesion;












32.


proposes that the Commission examine the administrative capacity of all levels of government to assess their capacity to implement EU funds, as this is one of the main factors determining the success and speed of implementation of RRF and other funds, as well as their long-term impact;






Brussels, 8 October 2024.


The President


of the European Committee of the Regions

Vasco ALVES CORDEIRO
               





ELI: http://data.europa.eu/eli/C/2024/7057/oj
ISSN 1977-091X (electronic edition)