EU's record recovery fund at risk as countries struggle to meet deadline
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[January 16, 2023] By
Belén Carreño, Robert Muller and Sergio Goncalves
MADRID/PRAGUE/LISBON (Reuters) - The risk that European Union
governments will not be able to spend the largest aid package in its
history is growing as members struggle to meet deadlines imposed by the
bloc, officials from four countries have told Reuters.
Difficulties in renegotiating the 724-billion-euro post-pandemic
recovery plan - less than two years after it was approved - raises
doubts about its ability to deliver at all, said Manuel Hidalgo, a
senior fellow at the Esade Centre for Economic Policy, a Madrid-based
think-tank.
"If all the money isn't spent this will have a reputational cost for the
EU," Hidalgo said. "If it doesn't turn out well they will have to
justify many things, such as the very existence of these kinds of
plans."
The thorniest issue will be securing unanimity from the bloc's 27
members on extending the disbursement of financing beyond 2026, which
would require approval in each country's parliament, including Hungary
and Poland, which are already at odds with the EU and may use their
support as leverage to secure concessions.
The EU froze funds earmarked for Hungary and Poland over their
nationalist governments' track record of undercutting liberal democratic
rules.
Poland's access to nearly 36 billion euros of funds is dependent on an
overhaul of its judicial system. The EU is withholding 5.8 billion euros
until Hungary implements measures to curb corruption and boost its
judiciary's independence.
Extending the implementation period faces "a major problem – the
decision on own resources would have to be reopened, which requires
unanimity, which is almost unthinkable", said Czech EU Affairs Ministry
spokesperson Marek Zeman.
Countries are already behind. While milestones and targets must be
reached by August 2026, 70% of grants and loans should have been
committed by last year and the remainder by 2023. The actual amount
committed so far is around 20%, according to EU data.
RAW MATERIAL COSTS
Recipients of the funds say that the rising cost of raw materials, a
product of the war in Ukraine, and supply chain bottlenecks have delayed
the adjudication and implementation of recovery projects.
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European Union flags flutter outside the
EU Commission headquarters in Brussels, Belgium, September 28, 2022.
REUTERS/Yves Herman
Portugal had disbursed 1.4 billion euros, or 8.5% of the total
recovery funds assigned to it, to project promoters by the end of
2022.
A spokesperson for Portuguese Cabinet Minister Mariana Vieira da
Silva said talks with the European Commission about a "reassessment
of goals" would begin this month and include a "review of the
execution period". Portugal was analysing which projects had been
most affected "by the current macroeconomic context," the
spokesperson said.
Italy expects talks to review some aspects of the plan to conclude
by February, although it has so far not asked for a deadline
extension beyond 2026, a source in the Italian government said. Rome
wants Brussels to take into account the negative impact of sky-high
raw material costs on public works, the person said.
Romania and Portugal are the two countries pushing hardest to extend
the 2026 deadline and Spain and other Eastern European countries are
supporting their demands, a source with knowledge of the
negotiations said. Spain will assume presidency of the European
Commission in the second half of 2023.
The EC may delay granting extensions for as long as possible in an
effort to push countries to complete as much of the original
schedule as possible, according to a source at the European
Commission.
A serious negotiation would start in 2024 and probably be concluded
in 2025, when it was clear that it would be impossible to deliver
what had been agreed previously, the person said.
Some countries are devising workarounds for projects that are
particularly important and look like they are unlikely to meet the
deadline, said a source. This would imply budgeting and allocating
funds before the projects have been commissioned in order to meet
the 2026 deadline, the person said.
(Reporting by Belen Carreño, Robert M. Muller and Sergio Goncalves;
additional reporting by Giuseppe Fonte, Gergely Szakacs and Jan
Strupczewski; Writing by Charlie Devereux; Editing by Alex
Richardson)
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