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Recovery Fund

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In July 2020, the European Council reached an agreement on the new Multiannual Financial Framework 2021-2027 and a fund to ensure Europe’s recovery after the COVID-19 crisis.

The fund, called Next Generation EU, has a total financial capacity of 750 billion euros in loans and grants and it includes a series of instruments, in particular:

  • Recovery and Resilience Facility: a fund aimed at supporting reforms and investments to boost Member States’ economies
  • React-EU: resources channelled through cohesion policy to support the sectors most affected by the pandemic
  • Rural Development: subsidies to help rural areas achieving European Green Deal’s goals
  • Just Transition Fund: a fund to support the green transition of the regions most affected by COVID-19

The Recovery and Resilience Facility is the core of Next Generation EU, with a total amount of € 672.5 billion for Member States, € 312.5 billion in grants and € 360 billion in loans.

The European Commission will disburse RRF funds to Member States after the approval of the Resilience and Recovery Plans, which they must submit by April 2021. The European Commission specified that Member States have to include in their plans investment and reforms in seven flagship areas:

  • Power up – Use future-proof clean technologies and accelerate the development and use of renewables.
  • Renovate – Improve energy efficiency of public and private buildings.
  • Recharge and Refuel – Accelerate the use of sustainable, accessible and smart transport.
  • Connect – Extend quickly broadband services to all regions and households, including fiber and 5G networks.
  • Modernise – Accelerate the digitalization of public administration and services, including judicial and healthcare systems.
  • Scale-up – Increase European industrial data cloud capacities and develop the most powerful and sustainable processors.
  • Reskill and upskill – Enhance education systems in order to support digital skills and educational training for all the citizens.

European Commission’s guidance provided that Member States should dedicate at least 37% of resources for supporting green transition and 20% for measures aimed at accelerating the digital transformation.

Following the presentation of Recovery and Resilience Plan, within 2 months the European Commission will assess the Plan and propose its approval to the Council of the EU. Than the Council has to approve the Plan within 4 weeks by qualified majority. Following the Plan’s approval, Member States will receive a 13% pre-financing of the total amount foreseen for each country.

Italy will be one of the main Next Generation EU beneficiaries and it will receive, from 2021 to 2026, about € 208 billion euros divided in the following way:

  • Recovery and Resilience Facility: € 193.1 billion, (€ 65.5 billion with grants + 127.6 € billion with loans)
  • React-EU: € 13.5 billion
  • Rural Development: € 0.8 billion
  • Just Transition Fund: € 0.5 billion
  • Other programmes: € 0.7 billion

On 9 September 2020, the Interministerial Committee on European Affairs (CIAE) approved the proposal of Italian guidelines for the Recovery and Resilience Plan, defining the challenges that the country will face, the priority missions in which all the projects will be divided and the reforms that will be linked to the clusters of intervention.

Challenges:

  • Improving Italy’s recovery and resilience;
  • Reducing the social and economic impact of the pandemic;
  • Supporting the green and digital transition;
  • Enhancing the economic growth and job creation.

Missions:

  • Digitalization & innovation
  • Green transition
  • Infrastructures & mobility
  • Education & Research
  • Cohesion & Inclusion
  • Health

Reforms:

  • Increase the public investments;
  • Reform of Public Administration;
  • Increase expenditures in Research and Development;
  • Fiscal reform;
  • Justice reform;
  • Labour reform.

On 7 December 2020, the Italian Government started the discussion on the updated version of the National Recovery and Resilience Plan. Then, on 12 January 2021, the Council of Ministers adopted the NRRP, which will be discussed with the Italian Parliament, regional and local institutions and civil society before the final approval.

The Plan is divided into 6 Missions, 16 Clusters and 48 Projects and it identifies 3 strategic priorities:

  • Digitalization and innovation
  • Ecological transition
  • Social Inclusion

Moreover, the Plan’s resources amount to 222.9 billion euros (more than the funds included in the NRRP guidelines), divided as follows:

  • 209.9 billion euros from RRF (with 65.7 billion used for existing projects and 144.2 billion for new projects)
  • 13 billion euros from React-EU

The Government decided to include in the Plan also 79.81 billion euros from 2021-2026 budgetary planning and 7.9 billion euros from European Structural Funds, with an overall total of 310.6 billion euros.

Next Generation EU resources will be divided between the 6 missions of the Plan as follows:

  • Digitalization, innovation, competitiveness and culture: € 46.18 billion
  • Green revolution and ecological transition: € 68.9 billion
  • Infrastructures for sustainable mobility: € 31.98 billion
  • Education & Research: € 28.49 billion
  • Cohesion & Inclusion: € 27.62 billion
  • Health: € 19.72 billion

On 1 April 2021, the Chamber of Deputies and the Senate voted two Resolutions on the National Recovery and Resilience Plan draft presented by the Conte Government in January, approving the report of the Parliamentary Committees.

On 24 April 2021, the Draghi Government examined NRRP final version, updated on the basis of the recommendations expressed by Parliament. On 26 and 27 April, Prime Minister Mario Draghi held communications to the Parliament in view of NRRP transmission of the PNRR to the European Commission. Following Parliament’s approval, on 30 April the Government sent NRRP to the Commission, respecting the deadline for 13% pre-financing that Italy should receive by the summer.

Resources

National Recovery and Resilience Plan’s total resources will amount to 235.1 billion euros, including:

  • 191.5 billion euros from Recovery and Resilience Facility: 68.9 billion in grants and 122.6 billion in loans.
  • 30,6 billion euros from a national complementary Fund that will be used to finance some additional projects not included in the Plan. As NRRP projects, the Fund’s investments will be monitored by national authorities, in order to achieve intermediate targets and quantitative objectives. However, these projects will not be reported to the European Commission and could have a longer deadline than 2026.
  • 13 billion euros from REACT-EU.

Moreover, 26 billion euros are allocated for specific projects to be completed by 2032.

Finally, about 15.5 billion euros as an advance from 2021-2027 Development and Cohesion Fund (FSC) will be used as additional resources.

The Plan allocates 40% of resources to Southern Italy (approximately 82 billion euros of 206 billion euros allocated on a territorial basis).

Thanks to NRRP implementation, it is expected an increase in GDP of 3.6% and an increase of 3.2% in national level of employment in 2026.

Strategic axes and transversal priorities

The Plan is developed around three strategic axes:

  • digitalization and innovation
  • ecological transition
  • social inclusion

All the Plan’s interventions aim to achieve three transversal objectives:

  • gender equality
  • protection and development of next generations
  • overcoming territorial divides

Missions & Clusters

The Plan is divided into 6 Missions and 16 priority clusters.

  1. Digitalization & innovation: 49.86 billion euros

40.32 billion euros from RRF plus 8.74 billion euros from national Fund plus 0.80 billion euros from REACT-EU.

  • Digitalization, innovation, and security of Public Administration: € 9.75 bln
  • Digitalization, R&D and innovation of the production system: € 23.89 bln
  • Tourism and Culture 4.0: € 6.68 bln
  • Green revolution & ecological transition: 69.94 billion euros

59.47 billion euros from RRF plus 9.16 billion euros from national fund plus 1.31 billion euros from REACT-EU.

  • Sustainable Agriculture and Circular Economy: € 5.27 bln
  • Energy Transition and Sustainable Mobility: € 23.78 bln
  • Energy efficiency and building renovation: € 15.36 bln
  • Protection of water resource: € 15.06 bln
  • Infrastructures for a sustainable mobility: 31.46 billion euros

25.40 billion euros from RRF plus 6.06 billion euros from national fund.

  • High-speed network and 4.0 road security: € 24.77 bln
  • Intermodality and integrated logistics: € 0.63 bln
  • Education & Research: 33.81 billion euros

30.88 billion euros from RRF plus 1 billion euros from national fund plus 1.93 billion euros from REACT-EU.

  • Support to education and right to study: € 19.44 bln
  • From research to enterprise: € 11.44 bln
  • Cohesion & Inclusion: 29.83 billion euros

19.81 billion euros from RRF plus 2.77 billion euros from national fund plus 7.25 billion euros from REACT-EU.

  • Employment policies: € 6.66 bln
  • Social Infrastructure, Families, Communities and Third Sector: € 11.17 bln
  • Special interventions for territorial cohesion: € 1.98 bln
  • Health: 20.23 billion euros

15.63 billion euros from RRF plus 2.89 billion euros from national fund plus 1.71 billion euros from REACT-EU.

  • Proximity assistance and telemedicine: € 7 bln
  • Innovation, research and healthcare digitalization: € 8.63 bln

Reforms

The NRRP also includes several reforms necessary to achieve Plan’s objectives on time:

Structural reforms

  • Public Administration: it is expected to simplify selection procedures in order to foster generational change, simplify rules and procedures, and align organizational and digital skills with the new requirements of the world of labour.
  • Justice: the reform includes measures to digitalize and reorganize the judicial system, revising the regulatory and procedural framework in order to address the excessive duration of trials.

Enabling reforms

  • Simplification of legislation, in particular regarding permits and authorizations, public procurement rules and environmental legislation.
  • Promotion of competition, through the adoption of the “Annual Law for Market and Competition”, in particular for development and management of strategic infrastructures in telecommunications, port and energy sectors.

Governance

  • Responsibility for Plan’s implementation will be entrusted to operational structures within the ministries and local authorities, in order to ensure projects’ implementation on time and an effective management of resources.
  • The Ministry of Economy and Finance will be responsible for monitoring the Plan’s investments and reporting to the European Commission on NRRP progress. 
  • A Steering Committee for NRRP will be set up at the Presidency of the Council of Ministers with a specific decree. The Committee will deal with monitoring of Plan’s progress and proposing regulatory measures necessary for projects’ implementation.

On 13 July, ECOFIN officially approved Italy’s National Recovery and Resilience Plan. The Plan already received the approval of European Commission, which assessed it with ten A and one B on “Costs” item, as the other Member States’ plans already approved.

According to the European Commission, the Italian Plan foresees 37% of measures aimed at green transition and 25% at digital transition, quotas slightly reduced compared to Italian government’s provisions, but in line with parameters defined by the Commission.

Italy’s request for 13% pre-financing, 24.9 billion euros in total – 9 billion euros in grants and 15.9 billion euros in loans – was accepted, and first resources were disbursed in August.

The Italian plan foresees to spend around 13.8 billion euros for 105 projects by 2021. However, in order to obtain next tranches of EU resources, Italy will have to achieve many objectives regarding investments and reforms’ implementation: as defined in European Commission’s proposal on approval of NRRP, Italy will have to achieve 51 intermediate targets to obtain around 24 billion at the beginning of 2022, and other 45 milestones by June 2022.

To this end, between May and June 2021 Italian government approved the three NRRP “pillars”, Plan’s governance, simplification of procedures and Public Administration recruitment. Moreover, by June 2021 the Government will present the reform of the justice system and public contracts and concessions, while in July the annual law on competition should be defined.