What is the recovery plan for Europe

COVID-19 has caused an unprecedented crisis. To repair the economic and social damage caused by the pandemic, the European Union has approved the largest stimulus package in its history, combining the EU's long-term budget (the 2021-2027 Multiannual Financial Framework) with a temporary instrument to boost recovery, called NextGenerationEU. The funding amount exceeds €1.8 billion. 

This recovery plan for Europe aims to help the region emerge from the crisis and lay the foundations for a modern, greener, sustainable, digital and resilient Europe, better adapted to current and future challenges. 

2021-2027 Multiannual Financial Framework

The recovery plan for Europe is funded, first and foremost, by the resources of the European Union's multiannual financial framework. This is a multiannual spending plan that translates the EU's priorities into financial terms and limits spending over a given period. The next Multiannual Financial Framework, for the period 2021-2027, amounts to €1,074 billion.

The Union's long-term budget is aimed at transforming the economy, strengthening the single market, boosting the twin ecological and digital transition and enhancing cooperation on security and defence.

NextGenerationEU 2021-2026

The innovative part of the EU's financial effort to recover from the consequences of the COVID-19 crisis is the provision of NextGenerationEU to member countries. It is a temporary recovery instrument that will provide €750 billion and is intended to help repair the immediate economic and social damage caused by the coronavirus pandemic and boost recovery.

This emergency economic initiative aims to accelerate the EU's sustainable recovery, mitigate immediate economic and social damage and preserve and create jobs. To this end, NextGenerationEU includes several financial instruments, mainly the European Recovery and Resilience Facility (RRF) and the Recovery Assistance for Cohesion and the Territories of Europe (REACT-EU).

The core element of NextGenerationEU is the European Recovery and Resilience Facility (RRF). The RRF is will provide €672.5 billion in loans and grants that will be available to support reforms and investments undertaken by EU countries. It aims to mitigate the economic and social impact of the coronavirus pandemic and to make European economies and societies more sustainable, resilient and better prepared for the challenges and opportunities of the green and digital transitions.

React-EU, or Recovery Assistance for Cohesion and the Territories of Europe (React-EU), is a new initiative that builds and expands the crisis response and repair measures implemented at the beginning of the pandemic by the EU through the Coronavirus Response Investment Initiative and the Coronavirus Response Investment Initiative Plus. It has funds amounting to €47.5 billion and aims to contribute to a green, digital and resilient recovery for the economy.

React-EU provides new funding for the EU's current cohesion policy programmes, i.e. extra funding on top of the resources already planned to be allocated for the period 2021-2027 for the European Regional Development Fund (ERDF), the European Social Fund (ESF) and the Fund for European Aid to the Most Deprived (FEAD). These additional funds will be provided in 2021-2022 under NextGenerationEU.

In addition to these two instruments, NextGenerationEU will also provide additional funding to other existing European programmes or funds, such as Horizon 2020 (that supports research and innovation activities), InvestEU (that supports investment in the EU), Rural Development or the Just Transition Fund (JTF, which helps territories facing serious socio-economic challenges arising from the energy transition process). 

Distribution of funds by member states

Of the €750 billion that make up NextGenerationEU, €672.5 billion will be provided to the 27 EU member states through the Recovery and Resilience Facility: €312.5 billion in grants and €360 billion in loans. The allocation to each country has been calculated based on demographic indicators, GDP per capita, average unemployment rate over the past five years and economic decline as a result of the pandemic.

Specifically, within the European Recovery and Resilience Facility between 2021 and 2026, which represents 90% of NextGenerationEU funds, Spain is allocated €81.900 billion euros in direct transfers (including ReactEU) and 67.3 billion in loans. Spain will receive the largest amount of aid, on a par with Italy.

In order to qualify for the MRR, Member States submitted their national plans by 30 April 2021.

React-EU funding will be distributed among Member States taking into account their relative prosperity and the extent of the effects of the current crisis on their economies and societies, including youth unemployment. Spain will receive a further €12.400 billion under this programme.

In addition, Spain will receive €790 million from the Just Transition Fund and €717.7 million from the European Agricultural Fund for Rural Development.

Other instruments in response to COVID-19

From the first instance COVID-19 emerged, the European Union mobilised all its resources to jointly address the pandemic and its consequences. In this regard, one of its first measures was the creation of the European Temporary Support to Mitigate Unemployment Risks in an Emergency (SURE). With a budget of €100 billion in the form of EU loans to member states, SURE is designed to mobilise financial resources to tackle the increased public spending and preserve jobs. Its aim is to protect people and mitigate the negative socioeconomic consequences of the pandemic. Spain has already received €21.3 billion from this programme and has used the aid to, for example, finance furloughs.

In addition, the European Investment Bank (EIB) approved the establishment of a Pan-European Guarantee Fund for €25 billion euros to address the economic effects of the COVID-19 pandemic. The Pan-European Guarantee Fund will provide financing to companies that are viable in the long term but have been affected by the current crisis, mainly SMEs. It will provide up to €200 billion in loans.

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