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EU recovery plan gets the reform incentives right

Release Date: 04 Aug 2022

The European aid package "NextGenerationEU" is being used for long-term infrastructure investments in climate protection and digitalisation. This is precisely what Europe's largest mechanical engineering association VDMA has been calling for.

Frankfurt/Brussels, 04/08/2022 – About 18 months ago, the EU  launched its recovery plan, financed by common loans. The aim was to support  EU Member States and at the same time to incentivize modernisation and reforms in the areas of sustainability and digitalisation. A recent report by the EU-Commission on the "Recovery and Resilience Facility" - the actual core of NextGenerationEU - has an initial positive conclusion.

The plans of the Member States exceed the targets, at least on paper, and the money is flowing into structural reforms as well as into sustainability and digitisation projects. From the VDMA's point of view, it is good that the funds from the recovery plan are actually being used for long-term infrastructure investments in climate protection and digitalisation and not just for short-term support. This is precisely what the VDMA had called for before the launch of the initiative.

At least 37 percent of the aid should be used for climate and environmental protection programmes and 20 percent for digitisation. The Member States want to exceed these targets: 40 per cent are planned for climate protection and around 26 per cent for digitisation. Germany and Austria are exemplary pupils in budget use for digitisation, where they want to invest more than 50 percent, while Bulgaria, Denmark, Luxembourg and again Austria excel in planning support for climate protection.

The report also gives examples of concrete reforms that have already been initiated by the Recovery Plan: Greece has for example passed a new law on waste management and Croatia a law on alternative fuels. Examples of concrete investment projects include renovation grants for homes in France and the purchase of 600,000 school computers in Portugal.

It is also addressed how the reconstruction plan will support the goals of RepowerEU: The RepowerEU plan aims to reduce Europe's dependence on Russian fossil fuels and accelerate the transition to clean energy. To this end, Member States will be asked to include a chapter on RepowerEU in their “Next generationEU”-investment plans in the future. If this is approved by the EU- Commission, support will  come from the recovery plan resources.

However, this proposal is criticised by the EU Court of Auditors because the distribution of funds was decided in the Corona crisis and miss current needs: Germany, for example, only receives around 8 percent of the Corona-aid budget, but is one of the hardest hit Member States by the energy crisis in Europe.

For further information read: VDMA on "RepowerEU" and VDMA statement on the reconstruction plan.

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