The Future of Europe

The new financial instruments of the EU: Multiannual Financial Framework (2021-2027) and the Recovery Plan

The Multiannual Financial Framework (MFF) 2021-2027, along with the Recovery plan (“Next Generation EU” Instrument) amount to 2.018 billion euros at current prices (1,8 billion euro at 2018 prices). These two important financial instruments were adopted after laborious and lengthy negotiations in the European Council that were held in Brussels during July 17th-21st 2020.

From the above total amount, the MFF amounts to 1.074 billion euros at fixed 2018 prices, whereas the Recovery Plan to 750 billion euros at, also, 2018 prices.

It is worth noting that the the original budget proposals of the Commission of May 2018, did not include the Recovery Plan. It was the outbreak of the pandemic, with the ensuing deterioration of the macroeconomic figures in the whole of the EU, that led the Commission to review its proposals. After the relevant French-German initiative, on May 20th 2020, the Commission submitted a new proposal, the cornerstone of which was the Recovery Plan.

The resources of the Recovery plan come from the Commission's lending from the international capital market, with the guarantee of the European Budget. In fact, it was not the first time that the Commission resorted to international lending (e.g. the European Stability Mechanism, which started to support the Greek Economy during the crisis of 2008). The important innovation of the Recovery Plan is, however, that it directs its resources towards green and digital transitions projects and sustainable growth more generally.

From the total resources of the Recovery Plan, 390 billion euros are grants, whereas 360 billion euros are loans. These resources are allocated among individual instruments, such as the Recovery and Resilience Facility – RFF (672,5 billion, out of which 312,5 are loans), the instrument REACT – EU (47,5 billion euros), the programme“HORIZON” (5 billion euros), the instrument INVEST – EU (5,6 billion euros), the Just Transition Fund for the Environment (10 billion euros) and the RESC-EU (1,9 billion euros). It should be, in any case, noted that out of the total resources of the Recovery and Resilience Facility, 37% should be allocated to climate (“green”) and 20% to digital transition.

As it follows from the above, the most important tool of the Recovery Plan is the Recovery and Resilience Facility. The RRF is allocated among the member states based on a set of criteria that reflect the impact of the pandemic on each one of them and also the level of the unemployment and the cumulative reduction of GDP during the period of operation of the instrument (2021-2023).

It is also important to note that for the first time in the financial history of the EU, the absorption of resources is linked not only to the macroeconomic balance, as it was the case until today, but also to the observance  of the rule of law and the sound use of the European budget resources. It is also noteworthy that, for MFF alone, 30% of its overall resources at national level are to be oriented towards green growth.

The agreement of July 20th is of great importance for Greece. The country, after all, has been aiming since the beginning of the negotiations at the largest possible increase in budget resources, while subsequently wholeheartedly supporting the creation of the Recovery Plan. It is a matter of principle, for Greece, that the EU's resources in the Member States must meet the needs and correspond each time to the given situation. Not the opposite, which is to determine the ceiling of resources in advance and their subsequent distribution based on specific indicators, which do not always reflect individual needs.

In terms of resources, the agreement of July 2020 brings to Greece an amount of about 70 billion euros. The amount of grants to our country from the Recovery Plan (especially the Facilitation for Recovery and Resilience and the REACT-EU) amounts to approximately 19 billion euros. To this amount the loans that the country can raise, amounting to 12,5 billion euros, can be added.

In conclusion, it should be mentioned that Greece had already submitted to the Commission since April 2021, its national plan for the absorption of the resources of Facilitation for Growth and Resilience. This Plan amounts to 17,8 billion euros in grants and to 12.5 billion euros in loans. This Plan has already been approved by the Economics and Finance Council (ECOFIN) on 13/7/2021.

For more information about the Greek National Recovery and Resilience Plan, follow the link : https://greece20.gov.gr/en/the-complete-plan/