Annexes to COM(2024)82 - Strengthening the EU through ambitious reforms and investments

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dossier COM(2024)82 - Strengthening the EU through ambitious reforms and investments.
document COM(2024)82
date February 21, 2024
Annex to the Council Implementing Decision are met. This is a prerequisite to disburse funds.

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In line with the progress made and the results achieved, EUR 225 billion have been disbursed in support of EU economies, olose to EUR 67 billion have been disbursed in pre-financing, which helped alleviate the sho rt~te rm impactofthe crisis on M ember States budge ts and kickstart implementation.^ In addition, EUR 157.2 billion have been disbursed upon the satisfactory fulfilment of milestones and targets, reflecting the progress with reforms and investments on the ground. A large part of these disbursements is linked to progress made in the implementation of reforms, which have deliberately been frontloadedto lay the groundwork forsuccessful investments in the second half of the RRF I i feti m e.

Around 75% of the milestones and targets planned to be achieved by end 2023 have already either been assessed by the Com mission as fulfilled or reported ascompleted by \\A ember States.'' Even those M ember States that have so far neither submi tted payment requests nor received funds from the RRF have already recorded progress with implementing the reforms and investments set out in their RRPs.

1.2. All plans have been revised to maximise the RRFs impact in a changing context

I n 2023, M ember States focused on making their RRPs fit to address new challenges, while advancing with their implementation. Increased energy prices, high inflation and

supply chain disruptions caused by Russia's unprovoked war of aggression against Ukraine,

and, in some cases, natural disasters made it challenging for M ember States to implement certain reforms and investments in their RRP. The C om mission supported M ember States^ in their efforts to mitigate these external constraints and to revise the relevant measures in their RRPs using the flexibility embedded in the RRF R egulation. Kevisions were also the occasion to u p d ate the RRPs to take account of the revised financial allocation to Member States^ and tap into the remaining loan support available under the RRF.

Plan revisions ensured that RRPs r emain both ambitious and fit for purpose. Am RRPs were updated in 2023, paying particular attention not only to the quality of the measures but also to their degree of maturity and their implementation horizon, given thetimebound nature of the RRF. C ommitmentsthatwere no longer achievable dueto objective circumstances were adjusted and, in many cases, replaced by more suitable alternatives, while keeping the original ambition of the RRP i nta ct. The RRFs broad scope has provided the necessary flexibili ty for M emberStatesto allocate resources according to their evolving priorities, in linewiththe RRF

objectives. Box 2 provides examples of how the revisions have maximised the RRFs impact

in areas such as disaster prevention, quali ty of public services or financial in st rumen ts to

s u p p o rt SMEs.

Out of the EUR 67 billion in p re "f i n a n c i n g , EUR 10.4 biiiion has been disbursed at the end of 2023 and in early 2024 upon the approval of the REP o wer EU on a pte rs.

The data on completed milestones and targe ts is self~reported by (Vie m be r States in the context ofthe b i ~ a n n u a I reporting.

Guidance on Recovery and Resilience Plans in the context of REPowerEU - uropean Commission (europa.eu)

In I i n e w ith Article 11(2) ofthe RRF Re gulation, the maximum financial contribution for non "repayable financial support of each Member State was u p d ated i n June 2022 o n the basis of Eurostat outturn data on the change in real GDP g r o wth over 2020 and the aggregate change in real GDP forthe period 2020-2021.

[Vie m ber States could request (additional) loan support until 31 A u g u st 2023, as sti p u I ated i n Article 14(2) of the RRF Regulation. Ofthe overall envelope of EUR 385.8 billion available for loan support under the RRF, cIose to EUR 291 billion have been com mitted by end -2023.

Through the revisions, the size of EU support to \\A em ber States has grown significantly. Close to EUR 150 billion in financial support was made available to EU economies in 2023 through both additional grants for the REP o w e r EU c h a pte rs and EUR 125.5 billion of loans. The large uptake of loan support demonstrates the continued attractiveness of the RRF as an instrument in supporting and transforming EU economies for the future. In totaI, and provided that all milestones and targets will be met, the RRF will i nj e ct EUR 650 billion in financial supportto our EU

LJox 2: RRPs have been revised to maximise their impact in a changing context

ovenia has requested additional loan support to cater for the devastating effects of the floods that hit the co u n try in rlu g u st 2023. The additional loans wi 11 further s u p p o rt

Siovenia's resilience against the effects of climate change and boost its green transition,

for example by investing in the sustainable renovation of buildings and the reconstruction of two regional r a i Iwa y lines, a ffecte d by the floods and sto r m s,

Ita ly has introduced targeted actions to reinforce the tools to reduce backlog in the civil Justice system. This includes measures to strengthen the office of the trial and the set~up of incentive schemes fo r Judicial off i ces to reach their o bj ecti ves in ter m s of reducing the number of pending cases, Th e ultimate objective is to create a more business friendly environment, attracting more investments and fostering growth,

Croatia has used additional loan support to cater for the effects of high inflation on its project on the public water supply network. Increased construction prices made part of the target on co nstr ucte d or reconstructed k 11 o m etres of the public wa te r supply network una tta I n a b Ie, H o we ver, Cr o a ti a decided to r eq u est additional loan support not o n I y to cater for the increased construction costs, but even to increase the ambition of the measure. The revised RRP now increases the final target from 956 to 1087 k i I o m etr es of co nstr ucted or reco nstr ucted public water supply network. This will further increase the number of citizens that benefit from I m proved access to water supply, |

Spain has includedfinancial instruments to improve SMEs9 access to finance. Given that

SlVllEs play a key role in the Spanish economic landscape, Spain requested additional loans to improve SMEs' access to capital m a r kets and I n ce nti v I se p r iv ate investment, n ota b Iy for SMEs operating in the green and digital sectors.

By end-2023 ( the deadline for committing NGEU _rel ated RRF funds), close to EUR 650 billion in financial support to EU economies have been committed. I his breaks down in EUR 357 billion in grants and EUR291

ion in loans

1.3. REPowerEU will further accelerate the green transition

The RRF helps accelerate the EU's green transition. The RRF R egulation requires that all

RRPs dedicate at least 37% of the total allocation to measures supporting the green transition. All Member States have exceeded this target (40% on average) with some M ember States dedicating over 50% of their total plan to climate objectives. In total, the estimated climate expenditure amountsto around EUR 275 billion, wn top of that, all measures supported by the

RRF m u st res p e ct the principle of 'do no significant harm' (DNSH), making the RRF the first

EU instrument where this principle is a horizontal general eligibility criterion. In addition, the RRF, together with the European Social Fund Plus and the Just Transition Fund, suppo rts employment and social policies, helping to make the green transition fair.

REP o w e r EU contributes further to saving energy, speeding up the production of clean

energy, and diversifying the EU's energy supplies. I n M arch 2023, the amended RRF

Regulation entered into force, requesting Member States to introduce REPowerEU c h a pte rs i n their RRPs. S i n c e then, 23 REPowerEU chapters have been approved. I hey include reforms and investments that will help save energy, contribute to renewable energy production, and reduce our dependency on Russian fossil fuels by establishing more resilient energy n etw orks,

Th rough the REP o w e r EU chapters, an additional EUR 60 billion will be dedicated to speeding up the green transition. Newly requested loans for REP o w er EU chapters make up EUR 40 billion ofthat, while additional gran ts for REP o w e r EU measuresfrom resources under the Emission Trading System and the Brex it Adj ustm ent Reserve make up the remainder. The reforms and investments introduced with the REP o w e r EU chapters complement and accelerate those already included in the RRPs. Box 3 provides examples of how the REP o w er EU c h a pte rs accelerate the green transition. The REP o w e r EU measures will bring forward substantial investments with the aim, for example, to deploy renewable energy capaci ty, including more recently maturing technologies such as offshore wind, to install electricity storage capacity, to decarbonise heating systems, to develop capaci ty for hydrogen production, and to suppo rt measures to alleviate energy pove rty . M o re o v e r, M ember States have included ambitious reforms in their REP o w e r EU chapters, for instanceto simplify administrative procedures and to facilitate the deployment of renewable energy sources, or to develop green skills which should facilitate the transition for workers and SMEs.

REP o w e r EU will also promote the objectives of the Green Deal Industrial P I a n ^ and

provide a more supportive environment to boost the EU industry's competitiveness and

to scale up the manufacturing capacity of net_zero_tech industries. RRPs, including their new REP o w e r EU chapters, can and should be used to suppo rt clean tech manufacturing. Examples of investments or reforms directly targeted at the net_zero industry can be seen in Spain, Croatia, Italy, Poland or Portugal. Examples of suppo rt to the decarbonisation of industry can be seen in Belgium, Germany, Greece, France, Hungary, Italy, Portugal or

The remaining four (Vie rn ber States (Bulgaria, Germany, Ireland and Luxembourg) have not submitted a REPowerEU chaptertothe Commission so far.

Com munication: A G reen Deal Industrial Plan forthe Net-Zero Age | E uropean Commission (europa.eu)

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Slovenia. All in all, E U R 68 billion from the RRF will support clean tech, clean energy and the

decarbonisation of Europe's industries.

LJox 3: REP owe r EU accelerates the green transition

with their unique mix of reforms and I nvestments, significantly contribute to the decarbonisation of the Euro pea n p o wer syste m , king into account the EU goals of

achieving c I i m ate neutral ity by 2050 and the i nter m ed i ate ta r get of at Iea st 55% GHG emissions reduction by 2030 a s well as the ongoing dialogue on setting a reduction target for 2040 (see the recent Co m m I ss I o n Co m m u n i cati o n on the 2040 c I i m ate ta r get, COM (2024)63), the decarbonisation of the ei ectr I c ity m a r kets wi II require not only a technological sh ift to re new a b I e en ergy sources, but also to build the necessa ry I nfr a str u ctu re to ensure e ner gy sec u r ity and a fforda bil ity fo r all citizens. To this end, Me mber States included further measures in their REPo wer EU ch a pte rs.

Decarbonise and make energy markets re n ewa b les~ba sed, hAember States accelerate and massively deploy renewable energy sources

• Czechia has introduced far~reaching reforms that will remove permit requirements for re new a b Ie p o wer installations of up to 50 KW, s h o rte n permit granting processes and provide a digital one~stop shop to help applicants with the permitting processes,

• Del g i u m wi d develop an "energy island" in the Belgian North Sea that will enable

the co n n ecti o n of at least 3,15 GW of future offshore wind energy to the onshore e I e ctr I c ity grid,

Ensure security of energy supply and affordable energy. Me mber Sta tes secure en ergy grids by improving infrastructure and addressing bottlenecks

• Slovakia will upgrade 250 km oftransmission lines, enhancing el ectr i c ity tr a de with neighbouring Me mber States and optimising the use of e Iectr ic ity from renewable so urces,

• l_atvia will increase the security and stability of ener gy supply to accelerate the cross~border project currently being implemented by Latvia, Lithuania, Estonia

and Poland aimed at ensuring the synchronisation of the Baltic States' electricity

networks with the Continental Europe network,

Doost the EU industry's competitiveness: Me mber Sta tes are scaling up the

m a n u fa cturing ca p a city of net~zero~tech I n d u str Ies

P o rtu g a I wi II support I nvestm ents in net~zero tech n o I o gy m a n ufa ctu r I n g p r oj ects with the goal of enhancing the competitiveness of the Portuguese industry, /\ total of EUR 50 million is a 11 ocated to s u p p o rt individual companies or p r oj ects to invest in technologies aligned with the Net~Zero Industry Act such as solar PV, o nshore and offshore wind, and batteries and storage.

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1.4. Implementation and disbursements are expected to pick up going forward

Disbursements under the RRF slowed down in the first half of 2023 before catching up again in recent months. During much of 2023, M ember States focused on revising their RRPs and adding REP o w e r EU chapters, notably in light of the external developments mentioned above, leading to a slowdown in the submission of payment requ ests. /As revisions of RRPs advanced, the submission of payment requests significantly picked up pace in the second half of 2023. Spec i f i c a I I y , b etw een M ay and December 2023, 26 payment requests were submitted and EUR 60.9 billion was disbursed. M ost of these disbursementstook place in the lastqua rte r of 2023. Dy the end of 2023, eight \\A emberStates had already received morethan 40% of th e i r grant allocation and overall, more than 34% of the total envelope of the RRF had been d i s b u rs e d .

"This positive momentum is expected to continue with a faster pace of implementation

during the second half of the RRPs lifetime. With 18 P ayment requests submitted towards

the end of 2023, over 650 mile st ones and targets are currently under assessment by the Commission. Should these mile st ones and targets be assessed as satisfactorily fulfilled, an additional EUR 41 billion would be disbursed, bringing total disbursements by June 2024 to over 40 % of th e RRF envelope I his momentum is expected to continue in the second half of the year. Overall, according to current planning, based on the information provided by the M ember States, the Com mission expectsto receive morethan 20 further pay ment requests this year, which would correspond to the disbursement of more than EUR 100 billion in 2024.

\\A ember St ates are expected to push ahead with implementation given that the RRF , a sts until 2026. Implementation must accelerate for all reforms and investments included in the plans. I he revisions of the plans in 2023 paved the way for this acceleration.

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2. The RRF has supported the recovery and brought innovation in EU so ending 2.1. The RRF effectively supports economic recovery in the EU

W hile it is too early to assess the full extent of its impact, the RRF p aved the way for the EU's economic recovery. I he determined and coordinated action at EU level under NGEU gave a strong signal of European unity that boosted economic confidence and helped stabilise market expectations, following the creation of the RRF, m ost initial RRPs were prepared remarkably quickly by M ember States in 2021 and implementation started rapidly. Lcono m ic activity bounced back to pre~pandemic levels by the third quarter of 2021. E mployment rates reached record~high levels, while unemployment declined to record~low levels of around 6% ih May 2023 and has remained close to these record lows ever since. I his is even more

remarkable given the two " OIICC" i n - a generation economic shocks" of COVID-19 and the

energy crisis. I he long-time scars on EU labour markets that they risked creating have been avoided. These positive economic and employment outcomes are of course not solely attributable to the RRF. Other EU instruments — such as cohesion policy funds or the SURE instrument of support to mitigate unemployment risks in an emergency — and actions by M ember States and other EU institutions played a key role as well.

The RRF has provided financial support to \\A emberStates, many of which lacked fiscal space to mitigate the social and economic impact of the COVID-19 crisis. The RRF delivered a swift response, disbursing EUR56.5 billion as pre~financing in 2021 and 2022, and an additional EUR 10.4 billion of pre_fi nanci ng in 2023 and early 2024, upon the approval of the REP o w e r EU chapters. This provided fastand directsupportto M ember States, in addition to the flexibilities and additional funding made available under the cohesion policy funds, playing a vital stabilising role in the aftermath ofthe crisis. These disbursements reduced urgent financing needs in M ember States, supported early action to help businesses and citizens, and enabled M ember States to implement much~needed immediate investments that otherwise might not have materialised. I he considerable narrowing of EU sovereign bond spreads following the historic agreement to issue common EU bonds to finance NGEU and the RRF further contributed to reducing fiscal pressure.

In contrast to previous crises, public investment in the EU was maintained and even increased in the aftermath ofthe COVID-19 p andemic and the energy crisis, from 3.0% in 2019 to an expected 3.3% in 2023. The RRF has significantly contributed to this positive outcome. I his encouraging trend is expected to continue in 2024 and 2025, as the aggregate

public inve st ment ratio is expected to rise to 3.5% of GDP by 2025. The Commission's Autumn

r r i4

Lconomic I orecast finds that around half of the expected increase in public inve st ment b etw een 2019 and 2025 is related to investments financed by the EU budget, particularly by

the RRF.

Autumn 2023 Economic F orecast. A modest recovery ahead after a challenging year ~ European Commission (europa.eu)

The Commission's economic modelling suggests sizeable macroeconomic effects of NGEU investment . I he model suggests that NGEU17 has the potential to increase EU re a I GDP by up to 1.4% m 2026 above a no- NGEU sc enario . I his is similar to the estimates of other organisations . I he model also estimatesthat NGEU could increase EU employment by

up to 0.8% in the short run, delivering persistently higher real wages in the medium term that

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reflect potential productivity gains of productive investment .

The simultaneous implementation of the RRF by all \\A ember States is est i m a t e d to generate a sizeable positive spillover effectthat increases average GDP, compared with a world without joint and coordinated action. These spillovers are estimated to generate an added value for the EU thatamountsto b etw een a quarterand a third ofthetotal impactofthe RRF. W h i I e all \\A ember States are estimated to benefit from sizeable cross border spillover effects because of rising demand across the integrated EU economy, the joint investment impulse from the RRF is a, so supporting upward economic convergence in the EU. T he r es u I ts predict that M ember States with belowaverage GDP spe cifically gain from these spillover effects, as they spur greater economic activity and cross_border trade,

The RRF has been designed to concentrate support on lower~incomeand more vulnerable em ber States hit hardest by the pandem ic. The RRF a, location key, which determines how much funding each M ember State can receive, was tailored to the exceptional crisis circumstances at the time, including the significant uncertainty on the effects that the still evolving pandemic would have across the EU. T herefore, it considers both the socio~economic context atthe onset of the pandemic and how M em ber States recovered from the crisis up until June 2022. At the same time, the RRF a, location key is still firmly grounded in the logic of economic cohesion, as it reflects the differences in GDP per ca pita across M ember States. Thanks to this, the RRF helps to counteract economic divergence, fostering economic stability

and growth where it is most needed. Based on the Commission's modelling, th e increase in economic output in 2026 rea c h es u p to 4.5% ih G reece, more than 4% ih C roatia, and around 3.5% ih Spa in and Bulgaria, compared with the EU average impactof 1.4%.

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QUEST model (cf. footnote 2).

To estimate the macroeconomic impactofthe RRF, the European Commission has produced stylised e x ~ a nte assessments ofthe macroeconomic impactof NGEU in vestment. I hese model simulations are notan ex_post evaluation ofthe actual impact, but rather an e x ~a nte model prediction based on sty Used assumptions. Nonetheless, the simulations presented here integrate up~to~date information on loan requests, inflation, and expected spending profiles. They focus on investments as the macroeconomic effects of structural reforms is much more challenging to model. For further information, see in particular, Pfeiffer P., J. Varga and J. in t Veld (2023) Q u a nt i f y ing spillovers ofcoordinated investmentstimulus in the EU, Ms croeconomic Dynsm,cs (27), p. 1843-1865. S ee also the ECFN D iscussion Paper (2021): https./lecono m y~ fi nance.ec.europa.eu/pu bl ications/q uanti f y ing~spi llovers~next~generation~eu~investrnent en.

The QUEST mode, results have been computed based on NGEU and not RRF in vestments. Mowever, the investments (loans and n o n " re p a y a b I e support) based on the RRF make up for around 90% of NGEU in vest m e nts.

Please see Annex II of the Staff Working Document on the rnid~terrn evaluation for a detailed discussion of the assumptions and model specifications.

See International Monetary Fund 2023 Article IV Con sultation on the Euro Area (page 44), Ju,y 2023.

Note that because the simulations focus on public investment (without accompanying I a bo u r" m ar ket reforms), the employment effects are relatively shorfli ved and real wage increases reflect most medium and long~run labour market benefits in the si mulations. By contra st, reforms targeting labour mark ets and increasing participation, which are included in numerous RRPs, can lead to large employment gains and higher potential growth in the medium and long run.

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2.2. The RRF plays a key role in supporting structural reforms and common EU pol icy priorities

One of the most notable successes of the RRF is its proven ability to incentivise the implementation of structural reforms. M aking RRF disbursements conditional upon the implementation of coherent packages of investments and reforms has created effective incentives for reform implementation. This notably includes reforms recommended for many years by the EU in the context of the Luropean Jemester, r\ II plans had to address all or a significant subset of the relevant countryspecific recommendations (CSRs). The E u r o p e a n Court of Auditors (ECA) confirmed thatthe RRPs contributeto addressing a significant subset of CSRs21 . In the two years preceding the RRF , the share of 2016-2017 CSRs reaching at least 'some progress' increased by only six percentage points from 53% i n 2018 to 59% i n 2020. I n comparison, the share of 2019-2020 CSRs reaching at least 'some progress' increased by 17

percentage points from 52% in 2021 before the implementation of the RRF to a I m ost 69% i n 2023. IVI o st progress has been made in the areas of access to finance and financial services, labour marketfunctioning, anti_money laundering and the business environment. As M ember States continue with the implementation oftheir plans, which address all or a significantsubset of th e i r CSRs, progress in addressing CSRs is expected to increase significantly going forward.

RRF- supported structural reforms and investments have fostered progress on com mon policy priorities and supported socio-economic convergence in the EU. R ef o r m s and investments supported by the RRF notably foster the green and digital transitions, as well as socio-economic convergence and implementation of the European Pillar of Social Rights. The RRF a, so s u p p o rts reforms that enhance institutional resilience, for instance to improve the functioning of public administrations as well asthe effectiveness ofjudicial systems. Examples of relevant reforms and investments are showcased in Box 4. They include energy efficiency, digital public services, sustainable transport, research and innovation, social protection, and access to the labour market, promoting gender equali ty. Looking ahead, the implementation of reforms and investments in line with the EU's policy priorities will continue to be a key goal

of the EU's policy framework, including as part of fiscal surveillance. In the context of the

rev i ew of th e EU fiscal rules, the Uommission placed particular importance on the role of reforms and investments that enhance fiscal sustainabili ty and address EU priorities and c o u n try "s p e c i f i c challenges.

There are major synergies between the RRF and ot her EU funds, notably in the area of cohesion policy. W ith the parallel implementation of the RRF and cohesion policy program mes, M ember States had to make strategic decisions on which funds to use to finance qualifying investments. These decisions depended on the respective scope, timeline and e I i g i b i I i ty criteria of the funds. Several M ember States have used the possibili ty to finance, with both the RRF and structural funds, enabling reforms and investments to maximise the i m p a ct of EU funding. For example, the Italian RRP includes a reform to improve the effectiveness of public investments in the water sector, which is expected to help address barriers to cohesion policy investments in sustainablewater management. Similarly, under the RRF, S lovakia updated its legal framework to facilitateconnecting newrenewablestothegrid, which will supportthe implementation of investments under cohesion policy to develop smart

Special report 21/2022. Recovery and Resilience Facility and the NRRP

s jeuropa.eu]

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energy systems, grid and storage. While it is too early to provide a comprehensive assessment of their impact on the ground, these synergies b etw een the RRF and oth e r EU funds are expected to increase as implementation of the RRF and cohesion policy progresses further. This will also require continued engagement and coordination b etw een all stakeholders i n v o I v e d . At the same time, the focus on RRPs implementation, has, among other factors, contributed to delays in implementing structural funds in some M ember States, and there is scope to exploit synergies be t w een the RRF and other EU funds even further.

4: Ene RRF accelerates the realisation of EU poli cy priorities

W,th its wide scope and large financial envelope, the RRF provides substantial funding to advance the implementation ofcommon EU policies,

Enhancing energy efficiency In buildings Is an EU priority, in order to a ch I eve the EU's c 11 m ate and environmental goals, while reducing e nergy bills fo r households and businesses, a n ks to the RRF more th a n EUR 102 billion I n vest m e nt wi II be made in energy efficiency, together with ambitious reforms to tackle administrative barriers,

• Fra n ce I n vests EUR 1.9 billion through the RRF to supportthe en ergy ren ovation

of social housing and the "MaPrinteRenov"' subsidy scheme for private housing.

Thro ugh the plan, more than 1,5 million households will be s u p p o rte d (ofwhich 730 000 have already received the subsidy) in their energy renovation works, Spain

will deliver on average 57 000 e n ergy efficie n cy renovations of dwe 111 n gs per yea r, This is above the initial target that was set out by the Spanish national energy and

climate plan of 50 000 dwellings per year,

T) i g ita 11 sati o n of public administration wi II be significantly s u p p o rte d by the current EU objective, as set out in the Digital Decade policy programme and in the Digital Compass, is to ensure that by 2030 ail key public services will be fully accessible online for everyone, including persons with disabilities. Key public services should comply with high security and privacy standards, a n ks to the RRF, m ore th a n EUR 48 billion are being invested in the d I g ita I i s ati o n of public administration,

• Greece is investing EUR 2,8 billion in the digital tr a n sfor m ati o n of its public sector entitles, Tne refo r m s and i n vest m e nts are fo cused on the digitisation of archives and enhanced dI g ita I services, incorporating modern IT syste m s and increased interoperability between systems and data,

Re search and innovation are amongst the most powerful tools to boost the Union's

economies and co m petit! veness at global scale, CSRs were regularly addressed to Me m ber Sta tes to enhance the effect! veness of policies and I n vest m e nts supporting research and I n no va ti o n, Jn a n ks to the RRF, m ore th a n EUR 47 billion are being I n vested to accelerate the development and tra nsfo r m ati o n of the R&l system in Me m ber Sta tes and b oost the support to key technological areas.


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• Czech I a a wa rded public co ntr a cts of more than EUR 195 million to conduct R&D in medical sciences. The c o ntr a cts aim fo r five co nsorti a (est a b I is h e d b etwee n universities, public research i n stituti o n s and other public and p r I v ate entities) to co n d uct R&D in p r I or ity medical sciences, including research on I nfecti o us diseases, cancer, neurosciences, m eta b o 11 c disorders, cardiovascular diseases, as well as research on the soc I o~eco n o m i c impact of diseases,

Su sta i n a b I e m o b i I ity is at the core of the EU's policy priorities and transport had long been one of the h a r d est secto r s to decarbonise, Th a n ks to th e RRF, m ore th a n EUR 38 billion are being I n vested in railway infrastructure and networks. The measures also improve rail connectivity in Europe through the expansion of the TEN-T network. Many Me mber States support this expansion with the Introduction of the European Rail Traffic Ma n a ge m ent System (ERTMS), which will increase sa fety and enhance interoperabii ity of trains in Tu rope,

• Ita I y is rolling out 2800k m of ERTMS th a n ks to the Ita I i a n RRP to fulfil its o bj ecti ves under the Euro pea n De p I o y m e nt P,a n of ERTMS. In Germany, the RRP is supporting the d I g ita I i s a tl o n of railways for subsequent versions of ERTMS,

Soci a I p r otecti o n , Th e Euro pea n Pi liar of So c I a I R ghts Action Plan, published by the Commission in Ma rch 2021, i nter alia sets out the way forwa r d fo r strengthening and modernising social protection systems. It includes a headline target to reduce the number of people at risk of poverty or social exclusion, E a n ks to the RRT, more th a n EUR 14,1 billion are being I n veste d in social p r otecti o n in complement of the a m o u nts spent with other EU spending,

• Croa ti a i ntr o d u ces a re for m and an investment to provide social mentoring to individuals at risk ofdiscrimination or in a marginalised position in socIety, These measures wi II roll out a new individualised mentoring service at social we I fa re centres, Th Is new service will fo c us on the inclusion of persons with disabilities, v I cti m s of violence, homeless people, m I g r a nts, Ro ma, young people, persons serving prison sentences and members of other socially vulnerable groups,

• Poland will implement a reform and an investment to improve the labour market situation of p a r e nts, and in particular of wo men, by increasing access to and a va 11 a b i I ity of h I g h ~ q u a I ity c h 11 dca re. The refo r m is exp ecte d to introduce a fram ework fo r qua! ity sta n da r ds fo r c h i I dca re, including binding educational guidelines and sta n d a r d s of care services fo r children under three years of age, which will be accompanied by the implementation of a n IT syste m to manage the financing and creation of c h 11 dca re facilities and the creation of new places in c h 11 dca re facilities.

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2.3. The RRF fosters holistic policymaking and boosts national ownership, but there are calls for flexibility to be enhanced

"The mid"term evaluation highlights that combining reforms and investments under one instrument through comprehensive national medium~term plans (RRPs) is one of the most effective aspects of the RRF. The RRF supports a holistic and coherent set of reforms and investments that address both EU policy priorities and country specific challenges. I his approach incentivises methodical planning in each M e m b e r Sta te and facilitates more efficient implementation. Coherent sequencing b etw een reforms and investments allows, for instance, reforms to be undertaken first, which will support the impact of subsequent investments. M oreover, synergies between reforms and investments can more easily be exploited where their implementation is coordinated in an integrated manner.

Under the RRF, M ember States can design reforms and investments in line with their priorities and needs, ensuring a targeted cou ntryspecific approach while supporting EU common policies. W h i Ie the RRF R egulation sets out overarching criteria that the plans need to comply with, M ember States are responsible for designing their plans and deciding on the reforms and investments to put forward, creating a strong sense of ownership, commitment, and accountability, which facilitates implementation. This is particularly the case for reforms, which often require national parliamentary approval. In addition, the close cooperation that is required b etw een the Commission, national ministries and implementing bodies has brought positive externalities in terms of policy planning and improved i nter_i nstitutional coordination. At the EU level, the European Parliament has an impo rta nt role in monitoring the implementation of the RRF. T his is illustrated by the 14 Re covery and Resilience Dialogues and 34 working group meetings that have taken place so far with the European Parliament. I o further increase the visibility and transparency of the RRF, the C om mission has launched an interactive map of projects supported by the RRF in each \\A ember State

"The involvement of regional and local authorities, social partners, civil society organisations and other relevant stakeholders is a key factor in the planning and i m plementation of RRP m easu res. W h i I e the RRF R egulation requires M ember States to include information on the consultations conducted when drafting their national RRPs , the level and form of involvement of these stakeholders depends on national legal frameworks and can differ significantly from one M ember States to another. A longside national authorities, who take on the main coordination and oversight role under the current legal setting, local and regional authorities, as well as social partners, civil soci ety organisations and other stakeholders, also have a crucial role to play. Local and regional authorities and relevant stakeholders, including social partners, have been pointing to their insufficient involvement in the design, implementation and monitoring of measures included in the RRPs. W h i I e th is may be partly explained with the need for speed in designing RRPs in a crisis context, it is key that, going forward, their close involvement suppo rts ownership and implementation on the ground. For instance, social partners should play a pivotal role in implementing labour market and social policy reforms.

^ h ttp s .lie om mission.europa.eu/business~economv~euro/economic~recovery/recoverv~and~resilience~ facility enffimap

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Sufficient flexibility in the design and implementation of RRPs is necessary to ensure continued added value and smooth implementation. Underthe mid~term evaluation ofthe RRF, M ember States called for more flexibility in the implementation of their plans. For i nstance, M ember States found the definition of milestones and targets too detailed and the fixedcomposition ofgroupsofmilestonesandtargetsforeach instal menttoo rigid, in particular where unforeseen circumstances impactthe originally planned implementation. This can cause implementation delays and administrative burden for all parties involved.

"The Commission a ct e d swiftly upon recommendations that transparency in the implementation ofthe RRF be enhanced. In line with the recommendations made by the European Parliament and the European Court of A uditors, the Commission , with the help of M ember States, used the opportuni ty ofthe plans TCVISIOHS 111 2023 to cia r i f y the definition of milestones and targets, where relevant and necessary. In 2023, the C om mission also published its methodology for assessing milestones and targets, for partial suspension of pay men ts and for reversal of milestones and targets to clarify its application of the RRF R egulation and provide M ember States with greater awareness. W hile the additional guidance was welcomed, further reflections are needed on whether more could be done in this regard.

RRPs revisions can be resource —intensive, but targeted adjustments were processed quickly. In general, revisions are considered cumbersome by M ember States as they require extensive justification as well as endorsement by the Council, thereby weighing on the flexibili ty of the instrument. However, provided they are targeted, they can be undertaken relatively quickly, vjermany ' s and Luxemb ourg' s R R P revisions, for instance, were assessed by the Commission and approved by the Council in tw o months. This targeted approach could be replicated in the future to respond promptly to new implementation challenges while keeping the ambition ofthe plans intactand continuing to comply with the RRF R egulation S requirements.

Efforts to improve the administrative capacity of \\A ember States and implementing bodies must continue. Some M ember States have experienced difficulties in mitigating the increase in the workload of administrations since the inception of the RRF. E nhancing the administrative capacity of M emberStates remains essential. It is key to makesurethat M ember States can reap the economic and social benefits ofthe RRF and oth e r EU funds and contribute to increasing absorption. M ember States have requested and received support from the Technical Support Instrument (TSI), both for the design and implementation oftheir RRPs and REP o w e r EU c h a pte rs. Over 400 p r oj e cts approved underthe TSI are linked to the preparation

or implementation of Member States' RRPs. The C om mission will continue to provide support

and advice to M ember States to address administrative capaci ty issues and investment bottlenecks. W here needed, the Commission has encouraged M ember States to include in their RRPs further support measures to facilitate the day~to~day management ofthe instrument (e.g. temporary staff, training, new IT systems) and improvethe efficiency of public administ rations (e.g. reform of public procurement in Slovakia and permitting procedures in Poland, digitalisation of administrations and processes in Spain).

Com munication I mplementation ofthe Recovery and Resilience Facility ~ European Com mission (europa, eu) 14 COM 2023 545 2 annex2 EN. pdf (europa.eu)

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2.4. The RRF i s the first major performance~based instrumentat EU , e v e I

Unprecedented in scale and ambition, the RRF disburses funds based on concrete achievements, making it the first large_scale performance-based instrumentat EU level. Rather tha n considering the costs incurred forthe implementation of projects, as in cost "based in st rumen ts, funds are unlocked upon the achievement of mile st ones and targets, which represent concrete steps in the implementation of reforms or investments by M ember States, with a results "based or, also_cal led, performance"based approach.

This performance-based approach is pivotal to the RRF'S effectiveness, ensuring the delivery oftangible results on the ground. The wide range of mile st ones and targets enables the effective monitoring of RRPs implementation , as they track the full life cycle of measures supported by the RRF25. T he approach also allows for disbursements of funds upon the achievement of intermediate steps in reforms and investments, rewarding progress towards

r es u I ts and actual 'performance' on the ground. Ac cordingly, the m id"term evaluation

highlights that because the RRF rewards progress along the way, disbursements are faster in comparison with other EU instruments. Urucia I ly, this approach also provides effective incentives for M ember States to deliver upon reforms, which do not necessarily come with (financial) co sts.

Performance-based funding increases the coherence and predictability of EU spending. The performance-based nature of the RRF has brought a more holistic approach to public spending, both at national and EU level. P roviding direct financial support upon the fulfilment of milestones and targets yields commitments and incentives to deliver on the actual implementation of the agreed measures. Furthermore, RRPs can be seen as contractual agreements b etw een M ember States and the EU where both parties willingly engage on the basisofclearcommitments. Inthecontextofthe m id"term evaluation ofthe RRF , sta k e h o I d e rs noted thatthe performance-based approach has increased predictabili ty and accountabili ty .The specific results to be achieved are set out clearly in advance (in the Council Implementing

Decisions), enhancing Member States' ability to plan ahead. The approach requires an adequate

specification of milestones and targets that avoids ambiguities regarding the implementation process and agreed measures. Overall, these features represent a shift in policy planning and implementation as well as in EU spending more broadly, the focus of spending is transferred from costs incurred to actual results and the delivery of agreed measures.

2.5. The RRF's reporting and control system will continue to require support and adjustments

Despite the positive fe atures of the performance-based approach, the RRF ere a te d entry costs for \\A ember State administ rations, with room for further administrative simplification. Concerning the design of the instrument, the requirements to protect the financial i n te rests ofthe Union led to a similar amount of administrative work as for other EU funds that are based on co sts. This is because on top of the evidence needed to prove the fulfilment of mile st ones and targets, M ember States need to collect different ty pes of data for audit and control purposes. r\s a new instrument, the RRF created entry costs for national

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Additionally, the RRF Re gulation introduces the concept of common indicators, which come on top of milestones and targets and whose purpose is to report on the overall performance and progress ofthe Facility towards its objectives. The

rnid"terrn evaluation highlighted weaknesses in the design of RRFcommon indi cators, which should betaken into account

in the reflection on future pe rf o r m a n ce " b ased instruments.

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ad mini st rations, and Member States' authorities at all levels found the audit and control

procedures too complex. In addition, M ember States complained about overlapping audits by national authorities, the Com mission and the European Court of A uditors. This perception may have been exacerbated by the implementation ofthe RRF simultaneously with cohesion policy funds, which follow different rules and rely, for the most part, on cost"based controls. The complex audit and control framework has adversely affected the speed of implementation of the RRF. I d e n ti f y ing potential areas of simplification in this regard remains a prior i ty for the Commission, including by considering the very thorough work carried out before disbursements are authorised, to verify the satisfactory fulfilment of milestones and targets. This needs to be balanced, however, against the imperative to manage EU funds appropriately to protect the financial interests of the Union and ensure transparency as to how funds are implemented, especially given the size ofthe instru ment and the novel nature ofthe approach.

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3. The RRF

will continue to deliver in the second half of its lifetime

The RRF has been an effective response to the unprecedented economic and social impact of the COVID-19 pandemic. It has been vital in protecting the single market, avoiding increased economic divergences in the EU, fast"tracking the green and digital transition, and helping M em ber States transform their econom ies to make them fit for the future. The RRF has been a major contributor to the increased levels of public investment during and after the pandemic, and its establishment has constituted a step change in the EU's capacity to respond to economic crises. The RRF also contributes to strengthening Europe's long "ter m

competitiveness and strategic autonomy.

The RRF has brought a more holistic approach to EU so ending. The RRF pays out based on progress and results achieved, rather than costs incurred, which provides predictability and accountabili ty for both the M ember States and the Commission. The consultations carried out under the mid~term evaluation show that there is broad support for performance_based instruments at EU level. This approach to EU so ending has already inspired major new programmes, such asthe Social Climate Fund and the Ukraine Facili ty. From this perspective, the performance_based nature of the RRF will be a reference point in discussions on EU spending in st rumen ts with a view to the next multiannual financial framework, and this mid" term evaluation provides a relevant basis for drawing some lessons learnt.

The fast roll-out and swift disbursements under the RRF show its ability to support \\A ember States in times of crisis, while the strong incentive for implementing reforms helps our economies and societies become b ette r equipped for the future. The RRF is proving to be a key tool for delivering on longstanding reform needs in many M em ber States, and the combination of reforms and investments into one single instrument allows for better planning, synergies, and more coherent action in line with EU and national priorities.

The second half of the RRPs lifetime has now started and implementation should

accelerate. LJelivering on the ambitious reforms and investments by 2026 will require significant effo rts and continuous dedication from all M emberStates and the Commission. The Commission will continue to consider ways of further supporting M ember States in the implementation of their plans and will seek to enhance complementarity among EU funding tools and b etw een those tools and national budge ts. W hile legislative changes do not appear appropriate at this stage, further action within the scope of the RRF R egulation will be considered to facilitate implementation.

All elements are in place to ensure that the RRPs contribute to delivering the EU's economic recovery and modernisation. In many cases, the reforms and investments included in each plan are already making a real and lasting difference on the ground. The revisions of the plans have laid the foundations for an acceleration of their implementation. In this way, the RRF's reform and investment agenda is helping to create a more modern, prosperous, inclusive, c I i m ate-n e utra I, and sustainable EU that is resilient and better prepared for future opport unities and challenges. These goals must be achieved together, through close cooperation among all EU institutions, Member States, civil society, workers and businesses.

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