Eu Agreement Recovery Fund

The Recovery and Resilience Mechanism (RFF), which is expected to receive funding of EUR 312.5 billion, is of paramount importance. 70% of these funds will be distributed in 2021 and 2022, with the remaining 30% (93.75 billion euros) in 2023. However, the key to the allocation of some EUR 94 billion will be the loss of GDP in 2020 and 2021; As a result, it is not yet clear how the money is distributed. In any event, countries such as Italy and Spain, which are particularly affected by the pandemic, should be able to receive much more money from the EU bailout fund than less affected countries, such as Germany and Austria. However, all EU Member States must submit national recovery and resilience plans to the European Commission that outline investment and reform plans for which planned EU funds can then be used. The amount of 390 billion euros is an important element of the agreement. The money would come from the 750 billion euro fund, officially known as the Next Generation EU. The European Commission will borrow all the money and issue loans lasting three to thirty years. It is expected to refund the money from 2027, with the tab to be settled by 2058. The EU agreement on a stimulus and resilience fund (RFF) to combat the economic consequences of the Covid crisis can be considered one of the bloc`s most historic achievements in recent decades. It is not so much the size and impending economic consequences that are so far-reaching as the symbolism of European solidarity. However, the implementation of the Fund proved more difficult than many market participants thought when it was first agreed in July.

Firstly, European finance ministers have still not agreed on the technical details of the Fund and no longer have time to do everything before the end of the year. Second, the decision to combine the multi-year budget framework with the rule of law mechanism and the recovery fund is a complication that causes delays. Implementation of the EU Recovery Fund Agreement could significantly improve the functioning of the single economic and monetary area, it relies on the issuance of EU bonds and plans to repay them with additional „own resources“ for the period 2028-2058, i.e. through EU taxes and levies instead of direct contributions from EU Member States.