The Lacklustre Take-Up, So Far, Of Europe’s Multi-Billion Rescue Fund

The EU's Recovery and Resilience facility is meant to help European economies recover from the Covid-19 crisis. The fund will serve more as a medium-term boost to growth than a crisis-fighting tool. That said, digitalisation and the greening of mobility, energy and real estate stand to gain significant investment so boosting overall GDP growth.

European Commission President, Ursula von der Leyen

Not all countries too eager to pick up a free lunch

It's the facility that's meant to help European countries recover from the Covid-19 crisis. €672.5bn of grants and loans are available and countries have been submitting their plans. But that take-up, at least so far is modest at best. Only 14 out of a possible 27 proposals have come in.  Like you would do when hosting an unsuccessful party, you extend the deadline for applications a bit to make sure you fill the room. That’s what the Commission has done as it has made the deadline flexible.

Some countries have already announced they will not participate for now, while others struggle to make proposals up to the Commission’s standards. For now, let’s take a look at what has already come in. And we're limiting ourselves to the investments and will leave the reform proposals for another time. 

It's important to say that the countries which haven't put proposals in so far have smaller maximum grants to receive from the fund. About 84% of the available grants have been applied for because the countries that stand to gain the most from the fund have already applied. The only country that is set to receive more than €10bn that hasn’t submitted a proposal so far is Romania. For the eurozone economy, the biggest one not tapping funds for the moment is the Netherlands at €6bn. Still, with very few countries opting for loans, the total amount of proposals comes in at ‘just’ €433bn, well shy of the total of €672.5bn in the facility.

As you can see from the chart below, it's obvious that Italy has gone big and bold with its proposal. Not only have they applied for the maximum amount of grants available to them, but they have also gone for an even larger amount in loans and add their own contribution to the plans on top (mind you, the proposal also includes a small amount coming from the recovery funds smaller cousin REACT-EU). That makes the amount for Italy - if approved – about 44% of the total money demanded so far.

But don’t count out Spain’s fiscal efforts either. While Italy’s plans spread out over the total period of 2021-2026, Spain’s plans are set to take effect in the first three years only, making the impact on GDP in the first recovery phase large.

Italy has applied for the largest sum from the facility; most grants have now been applied for

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Disclaimer: This publication has been prepared by the Economic and Financial Analysis Division of ING Bank N.V. (“ING”) solely for information purposes without regard to any ...

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