One of the recent hottest topics in Europe, besides the worries of COVID, is the Next Generation EU fund.
This article provides readers with a general overview of this new measure determined by the European Union to face the economic crisis brought by COVID-19.
The Next Generation EU fund (so-called NGEU) is a European initiative to provide financial support to all member states to revive the economy sunk by the pandemic crisis.
This mega investment plan aimed for the EU’s economic recovery has a budget amount of €750 billion. The entire sum of 750 billion euros will be raised on the markets with the issuance of common debt, jointly and severally guaranteed by all EU countries.
The NGEU budget will work on top of the EU long-term budget of €1.074 trillion for the period 2021-2027 and, specifically, this will be a COVID-19 dedicated recovery package channeled through the EU long-term budget.
The 2021-2027 long-term EU budget, together with the Next Generation EU budget, amounts to an unprecedented €1.8 trillion of funding to support the COVID-19 recovery and the EU’s long-term priorities across different policy areas.
The main feature of NGEU is the ‘Recovery and Resilience Facility’ that will be responsible for providing €672.5 billion in loans (€360 billion) and in grants (€312.5 billion) to support reforms and investments in each member state.
Next Generation EU is a future-oriented fund that not only tries to fix the consequences of the pandemic but will also make investments in the EU’s long-term future.
Accordingly, there are specific EU priorities that Next Generation EU will focus on.
The European Green Deal
In order to face climate change, NGEU’s funding will introduce the circular economy in buildings and infrastructure, develop renewable energy projects, optimize transport and logistics, and strengthen the Just Transition Fund aimed at supporting EU regions most affected by the transition to a low carbon economy.
By this project, the EU aims to cut greenhouse gas emissions by at least 55% by 2030 and achieve climate neutrality by 2050.
The plan includes also potential carbon tariffs for countries that will not cut their gas pollution following a mechanism called Carbon Border Adjustment Mechanism (CBAM).
The European Single Market
With a particular focus on the single market’s adaptation to the digital age, investments will be made in better connectivity like the 5G networks, cybersecurity, and new technologies.
The EU Digital Single Market strategy is built on the following three pillars:
- better access for consumers and businesses to digital goods and services across Europe;
- creating the right conditions for digital networks and innovative services to flourish;
- maximizing the growth potential of the digital economy
A fair and inclusive recovery for all
NGEU will supply funding to combat European unemployment by focusing on developing EU citizens’ digital skills to better adapt to the new digital scenery.
Fair minimum wages, and binding pay transparency measures, will help vulnerable workers in particular women.
NGEU is currently finalizing the joint preparation of each national plan for “Recovery and Resilience” with common guidelines promoted by the European Commission to be followed, with particular attention to the green and digital economy, youth, education, and research.
Let’s take a look now at the Italian Recovery Plan.
It is recent news that on June 22, the European Union approved the plan prepared by the Italian government, called PNRR (National Recovery and Resilience Plan), which is a part of the Recovery Fund envisaged by Europe.
A considerable amount of the financial resources will be allocated to Italy from the EU as it will be disbursed in total €191,5 billion, of which € 69 as grants, and an additional € 30.6 billion will be funded by the Complementary Fund established by Decree-Law no. 59 of 6 May 2021.
Based on the data provided by the European Commission, this plan will support an increase in GDP between 1.5% in 2021 and 2.5% in 2026.
The Italian Plan is developed around three main strategic fields: digitalization and innovation, ecological transition, and social inclusion.
The budget will be shared among 6 different missions:
- Digitalization, Innovation, Competitiveness, Culture: € 49.2 billion
- Green Revolution and Ecological Transition: € 68.6 billion
- Infrastructure for sustainable mobility: € 31.4 billion
- Education and Research: € 31.9 billion
- Inclusion and Cohesion: € 22.4 billion
- Health: € 18.5 billion
It is important to point out that the Italian plan will be accompanied by reforms that Italy strictly needs to push the growth of its economy and restore competitiveness to its production system.
The first set of planned reforms concern justice, procurement, licenses, and competition reform.
As Mario Draghi stated during the press conference held in Rome on June 22, together with the President of the Commission Ursula Von der Leyen, Italy has prepared very ambitious reforms and investments plan that aims to make Italy a fairer country, more competitive, and with sustainable growth.