The Recovery Fund (RRF) goes live – and I got to play a part!

Right after I entered the European Parliament in Summer 2019, we started working on a reform of the economic architecture of the EU. This week, 18 months later, voted in the European Parliament with overwhelming majority (see photo) on the centrepiece of the Recovery Fund, the Recovery and Resilience Facility. At €672.5 billion, it is the largest EU spending programme ever, which I got to shape as a negotiator for my group. If you want to know more about how it works, here’s a good overview.

 A game changer for Europe

I am really proud (and still a bit overwhelmed) that the Recovery and Resilience Facility is now entering the reality of people all over Europe! When I was elected, there was no common European fiscal policy tool and no needs-based solidarity in times of crises. And when the financial crisis hit in 2008 there were only unloved and undemocratic tools like the ESM.

All this has changed this week! The RRF is a political, federalist, European innovation. A real game changer that may very well mark the beginning of a more permanent economic architecture in the EU.

With our vote this week, my job as a negotiator is done. But there is some much more work to come! As MEPs we will be watching closely what will happen with this money, to make sure that it is well spent and that reforms are being pursued. I will be watching because I care a lot about the success of this programme – which is so closely linked with the future direction of the EU as a whole.

But there are some things that we need to look out for and that I wanted to share with you here.

The struggles in Italy and Spain show that national plans need to be publicly debated and scrutinised

It is a dangerous game to try to negotiate the distribution of funds and reforms without relying on democratic processes. This is especially the case when many billions of Euros are concerned. This has been shown in Spain, where there has been a major coalition row over the reform component of the national recovery plan, and even more so in Italy, where the government has even broken up over the content and ambition of the plan.

In Berlin the opposite is the case. No one seems to care. The coalition partners have kept a tight lid on disagreements on the allocation of investments and reforms worth 23 billion Euro, while the Bundestag has not been involved. This is a mistake. Germany should learn from Conte’s example that the distribution of money and reforms is a deeply political matter and should be subject to parliamentary scrutiny.

The German plan is a missed opportunity: it proposes a mere “repackaging” of previously announced investments and lacks serious reform ambition

The German government, which loves to lecture others on the importance of structural reforms in recipient countries, is letting itself off the hook as far as its own reform ambitions are concerned (Handelsblatt reported in German). Instead of following the Commission’s country-specific recommendations for 2019 & 2020, as provided for in the RRF regulation, the federal government is shirking important reforms such as lowering the tax burden on labour, the abolition of marital splitting, or the modernisation of the German pension system. The government is also cutting corners by “repackaging” investments it already announced in the summer 2020 stimulus package of instead of setting new impulses.

Germany’s bad example would be a wasted opportunity for all of Europe

Germany is already mimicked by France in following this strategy of minimising political risks by repackaging investments and ignoring the Commission’s reform recommendations. Indeed, both countries have a role model function in Europe that cannot be underestimated. Other countries observe closely when the two European heavyweights are not taking up the ambitions of the RRF and there is a high risk that this will lead to less ambition also in other parts of Europe.

This is all the more relevant when considering that the Council alone (on the recommendation of the Commission) will adopt the national plans. Nothing keeps member states from following the good old “you scratch my back, I scratch yours”-principle, letting each other of the hook.

Because of this risk, it is of the highest importance that MEPs, together with national parliaments and also the press, hold member states and the Commission accountable by demanding ambitious investment programmes and reforms in the common European interest.

The European Parliament is preparing itself to stand up for transparency and budgetary oversight

The Recovery Fund legislation provides for extensive oversight powers for the European Parliament. It will receive all documents on an equal footing with the Council and can summon the Commission at any time for explanations, which in turn must take its opinions into account in its recommendations. The Parliament also plays an important role in the tracking of expenditure and has can vote on the “recovery scoreboard” and the delegated acts determining the information obligations.

My fellow MEPs and I will therefore watch closely to ensure that countries comply with the requirements for climate-relevant investments (e.g. the “do no significant harm” criterion or the implementation of the investment criteria in Annex III) and digital spending. We will also demand that national plans explicitly address the crisis impact on women, so that the Recovery Fund does not only benefit male-dominated sectors.

A unique opportunity for a true common fiscal policy in Europe

The Recovery Fund can be a major step forward for the fiscal and economic architecture of the European Union. For the first time, we are using the power of the common EU budget to issue European bonds through the Commission, which we will repay through new European own resources. We simply cannot afford to squander this historic opportunity. We need ambitious investments and reforms in all 27 EU states so that the programme contributes to a real modernisation of the EU. Only in this way can we also pave the way for a long-term fiscal policy reform in Europe.

The RRF implementation starts now! We will, of course, keep you up to date.

Kind regards,

Damian Boeselager