Was the RRF set on the right track? Reviewing the European Commission’s assessment of the National Recovery and Resilience Plans
By Giuseppe Diana, Regulation of Markets and Competitive Economy Directorate
The Recovery and Resilience Facility (RRF) has some very specific characteristics. It is a new instrument developed in response to an EU‑wide crisis, for which the EU has issued common debt and developed a specific performance‑based approach unlike that of any previous EU instruments. It is also the largest EU instrument to date by value. For these reasons alone, it is of the utmost importance that the RRF succeeds. To give it the best chance of doing so, proper assessment of the Member States’ national recovery and resilience plans (NRRPs) by the Commission was crucial. In September 2022, the ECA published a special report evaluating the quality of this assessment. Giuseppe Diana, who was head of task, shares his experience and impressions from the audit, providing some insights into the report and the challenges the audit team faced.
Member States’ plans submitted to Commission’s scrutiny
In July 2020, in response to the COVID‑19 pandemic, the European Council agreed a temporary recovery instrument worth more than €800 billion (in current prices) — NextGenerationEU. Its centrepiece is the Recovery and Resilience Facility (RRF), established by Regulation (EU) 2021/241 (hereinafter referred to as ‘the RRF Regulation’). Amounting to a maximum of €723.8 billion in total (in current prices), the RRF provides grants (up to €338.0 billion in grants) and loans (up to €385.8 billion) to Member States to mitigate the impact of the COVID‑19 crisis, sustain their post‑pandemic recovery and make them more resilient for the future. The RRF is equivalent in value to about two thirds of the 2021–2027 multiannual financial framework and is the largest EU instrument to date.
To benefit from RRF support, Member States had to submit their national recovery and resilience plans (NRRPs) to the European Commission, as a rule by the end of April 2021, for assessment based on certain criteria and conditions. NRRPs comprise a set of measures, either investments or reforms, grouped into thematic components (e.g. climate‑friendly mobility or digitalisation of education) which have to contribute appropriately to six policy areas or ‘pillars’ of EU‑wide relevance (see Figure 1).
Figure 1 — Policy areas addressed by the RRF (six pillars)
Following submission, the Commission had two months to assess the plans and make a proposal for an implementing decision to the Council. The Council then had four weeks to make a final decision based on the Commission’s proposal. The first plans were thus adopted at the end of June 2021.
Article 19 of the RRF Regulation governs the Commission’s assessment of the plans. Annex V to the RRF Regulation provides additional assessment guidelines to ensure a fair, equitable and transparent process. Together, these provisions formed the core basis for the ECA’s examination of the Commission’s assessment of the NRRPs, which was based on the 11 criteria stipulated in Article 19(3) of the RRF Regulation. These 11 criteria are split into four categories: relevance, effectiveness, efficiency and coherence (see Table 1).
The Commission assessed NRRPs in close cooperation with Member States. During the preparation of the NRRPs, Member States submitted draft plans and the Commission provided them with guidance and support to ensure they met the 11 criteria set out in the RRF Regulation.
Once the NRRPs had been officially submitted, the Commission had two months to resolve any remaining issues together with the Member States and request further information or changes, before finalising its assessment and issuing its official proposal for a Council decision.
First audit results in a series relating to the RRF
Our audit, culminating in special report 21/2022 The Commission’s assessment of national recovery and resilience plans (see Box 1 below for the main conclusions), was the first in a series of ECA audits on the RRF. Its main objective was to examine whether the largest EU instrument to date was on the right track. To this end, we selected a sample of six Member States and examined the appropriateness of the Commission’s assessment of their NRRPs. We examined whether the assessment process and guidance for Member States were managed effectively, and whether they resulted in NRRPs that were relevant to the RRF’s objectives and met the conditions defined in the RRF Regulation.
We examined the appropriateness of the European Commission’s assessment of the RRPs from the start of the process, i.e. from the submission of the first draft plans. The audit work started in mid‑June, two weeks after the Commission had issued its first assessments of the NRRPs. Firstly, we checked whether the Commission managed the process itself effectively and whether it provided appropriate and adequate guidance to Member States on preparing their plans.
Secondly, we checked whether the plans addressed the RRF’s objectives and met the criteria set in the RRF Regulation:
- we selected six Member States: the four with the largest grant allocations in absolute terms (Germany, Spain, France and Italy) and the two with the largest grant allocations relative to their respective 2020 gross domestic products (Greece and Croatia);
- we selected 42 measures (seven per Member State) and assessed in detail whether they met specific criteria (criterion 4 on the ‘do no significant harm’ principle, criterion 5 on the green transition, criterion 6 on the digital transition and criterion 9 on costing). The seven measures in each of the six Member States in our sample were selected on the basis of materiality (highest cost) and from the following thematic areas: ‘transport’, ‘green transition’, ‘digital transition’, ‘health’ and ‘other’ for investments, and ‘fiscal’ and ‘social’ for reforms; and
- we assessed the nature and timeframe of the milestones and targets in the six sampled NRRPs, as well as the Member States’ approach to defining them.
Commission’s assessment process makes audit challenging
The purpose of the audit was not to re‑perform the Commission’s assessment of the NRRPs or assess the quality of the plans themselves. Although we did re‑perform specific aspects of the Commission’s assessment, such as the plans’ contribution to addressing country‑specific recommendations, the focus of the audit was the Commission’s assessment process.
This process was based on continuous dialogue, which started even before the official submission of the NRRPs. Member States had to cooperate with the Commission during the preparation and assessment of their NRRPs and provide it with any additional information requested. Member States submitted draft plans or parts thereof to the Commission as early as the end of 2020, and the Commission commented on them and requested additional information where necessary. The Member States then replied to the Commission, which in turn made new comments. This was done in different ways: letters, emails, phone calls, meetings, etc. This iterative process resulted in a massive quantity of supporting documents (thousands of emails, meeting minutes, letters, etc.), which made it difficult for the audit team to obtain, in a timely manner, the evidence needed to support the Commission’s final assessment. Although such documents were available and recorded, they were not always easily traceable.
Another challenging aspect of the audit was that the assessment of the 11 criteria was, by its very nature, qualitative and prone to discretion and subjectivity. We nevertheless managed to obtain a good picture of the quality of the Commission’s assessment, not least thanks to fruitful and constant dialogue with the auditee.
Identifying future risks now
To conclude, although our report focused primarily on the Commission’s assessment, it also highlighted risks and challenges that might affect the implementation of NRRPs, particularly in relation to the lack of clarity of some milestones and targets and to Member States’ proposed monitoring and control arrangements. Even though our audit work did not directly address all such issues, it is nevertheless important to highlight the challenges that lie ahead, since the success of the NRRPs will also be affected by risks that neither the Commission nor we can fully identify yet. These include, in particular:
- operational and governance risks: the multi‑layered management, governance and control structures, and the potential lack of political consensus on certain reforms being planned;
- implementation risks linked to:
o operational issues such as weak administrative performance, procurement processes being challenged, or scarcity of certain infrastructural materials;
o the complexity and novelty of many measures;
- residual risks: the 5‑year term of the RRF exposes the RRPs to market, economic and other risks not factored into planning scenarios (security, inflation and cost volatility, etc.).
For all these reasons, the implementation of the RRPs and the effectiveness of the RRF will require further ex post scrutiny. The ECA has already started this work and, as indicated in the ECA’s 2022+ Work Programme, various reports on the RRF will be published in the coming months, including in relation to other EU instruments.
This article was first published on the 2/2022 issue of the ECA Journal. The contents of the interviews and the articles are the sole responsibility of the interviewees and authors and do not necessarily reflect the opinion of the European Court of Auditors.