EU ‘should not rush to roll back’ pandemic recovery fund, IMF chief warns

6 months ago 25

The EU’s multibillion pandemic recovery fund is a “success story” that European policymakers “should not rush to roll back”, the International Monetary Fund (IMF) Managing Director Kristalina Georgieva said on Monday (29 April).

Speaking at the EU’s annual budget conference in Brussels, Georgieva praised member states’ decision in July 2020 to jointly borrow €806.9 billion under the Next Generation EU programme (NextGenEU), for showing “markets that the EU stands together” when faced with a “common and great problem”.

“July 2020 will go down in history as a time of profound European cohesion,” said Georgieva, a Bulgarian who served as the EU budget commissioner from 2014-2016.

“Next Generation EU is clearly a success story — one the EU should not rush to roll back,” she added.

Georgieva’s comments echo those of current Economy Commissioner Paolo Gentiloni, who said earlier this month that the €723 billion Recovery and Resilience Facility (RRF) — NextGenEU’s flagship scheme — should become a “blueprint” for future EU programmes.

Agreed at the height of the COVID-19 pandemic, NextGenEU offers member states financing to make critical green, digital, and other investments in exchange for targeted reforms.

The scheme is set to expire in 2026, prompting worries around how to tackle the €620 billion funding needs the European Commission has estimated the bloc’s 27 member states will need every year to ensure the green and digital transition of their national economies.

While in his high-level report on the single market, former Italian prime minister Enrico Letta also threw his support behind the need for permanent EU-level joint public funding, the renewal of the RRF has been heavily resisted by conservative political groups as well as ‘frugal’ member states — including Germany, the bloc’s largest economy.

The RRF has also been heavily criticised by the European Court of Auditors and other EU anti-fraud bodies for the lack of centralised control over the funds’ disbursement, which they claim has increased the risk of “irregularity or even corruption”.

In recent weeks two RRF-related scandals have been reported in Greece and Italy, where hundreds of millions of euros are believed to have been embezzled.

During her speech, Georgieva also stressed that the next seven-year EU budget — the €1.2 trillion Multiannual Financial Framework (MFF), whose current edition is set to expire in 2027 — should focus on reducing the cost of energy through increased investments in renewables as well as expanded expenditure in the area of artificial intelligence.

Georgieva also urged policymakers to leverage additional investments from the European Investment Bank, the European Bank for Reconstruction and Development, and the private sector.

“How we do in this next budget is going to be absolutely paramount for the success of Europe,” she said.

[Edited by Anna Brunetti/Zoran Radosavljevic]