Covid-19 has been 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 Union’s long-term budget (the Multiannual Financial Framework 2021-2027) with a temporary instrument to drive recovery, called NextGenerationEU. The economic amount exceeds 1.8 billion euros.
This recovery plan for Europe aims to help emerge from the crisis and lay the foundations for a modern, greener, more sustainable, digital, and resilient Europe, better adapted to current and future challenges.
Multiannual Financial Framework 2021-2027
The recovery plan for Europe is endowed, first of all, with the resources of the multiannual financial framework of the European Union. This is a multi-annual spending plan that transforms the EU’s priorities into financial terms and limits spending for a specified period. The next Multiannual Financial Framework, for the period 2021-2027, amounts to 1,074 million euros.
The Union’s long-term budget is aimed at transforming the economy, strengthening the single market, boosting the double ecological and digital transition, and intensifying cooperation in security and defense.
The novelty of the economic effort that the Union will make to recover from the consequences of the Covid-19 crisis is the provision of NextGenerationEU member countries. It is a temporary recovery instrument endowed with 750,000 million euros and whose objective is to help repair the immediate economic and social damage caused by the coronavirus pandemic and promote recovery.
This emergency economic initiative seeks to accelerate the sustainable recovery of the EU, 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 Mechanism (MRR) and the Recovery Aid for Cohesion and Territories of Europe (REACT-EU).
The core element of NextGenerationEU is the European Mechanism for Recovery and Resilience (MRR) . The MRR is endowed with € 672.5 billion in loans and grants that will be available to support reforms and investments undertaken by EU countries. Its aim is to mitigate the economic and social impact of the coronavirus pandemic and make European economies and societies more sustainable and resilient and better prepared for the challenges and opportunities of ecological and digital transitions.
For its part, ReactUE, or Recovery Aid for Cohesion and the Territories of Europe (ReactUE) , is a new initiative that continues and expands the crisis response and repair measures applied at the beginning of the pandemic by the EU through Investment Initiative in Response to Coronavirus and Investment Initiative in Response to Coronavirus Plus. Its financial endowment amounts to 47,500 million euros and its objective is to contribute to an ecological, digital and resilient recovery of the economy.
ReactUE makes funds available to the Union’s current cohesion policy programs; In other words, it provides extra financing that is in addition to the resources already provided for the period 2021-2027 for the European Regional Development Fund (ERDF), the European Social Fund (ESF) and the European Aid Fund for the Most Disadvantaged (FEAD). ). These additional funds will be contributed in 2021-2022 from NextGenerationEU.
In addition to these two instruments, NextGenerationEU will also contribute additional funds to other existing European programs or funds, such as Horizon 2020 (which supports research and innovation activities), InvestEU (which supports investment in the Union), Rural Development or the Just Transition Fund (FTJ, which helps territories facing serious socio-economic challenges derived from the energy transition process).
Distribution of funds by member countries
Of the 750,000 million euros that make up NextGenerationEU, 672,500 million euros will be channeled to the 27 member countries of the European Union via the Recovery and Resilience Mechanism: 312,500 million euros in grants and 360,000 in loans. The allocation to each of the countries has been calculated from demographic indicators, GDP per capita, the average unemployment rate for the last 5 years, and the economic decline as a consequence of the pandemic.
Specifically, within the European Recovery and Resilience Mechanism between 2021 and 2026, which represents 90% of NextGenerationEU’s funds, Spain is entitled to 81.9 billion euros in direct transfers (including ReactEU), and 67.3 billion in loans. Spain will be the country that will receive the largest volume of subsidies, at the level of Italy.
In order to qualify for the MRR, Member States submitted their national plans before April 30, 2021.
ReactEU funding, meanwhile, will be distributed among the 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 another 12.4 billion euros from this program.
In addition, Spain will receive 790 million euros 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 moment that covid-19 emerged, the European Union mobilized all its resources to jointly face the pandemic and its consequences. Thus, one of its first measures was the creation of the European Instrument for Temporary Support to Mitigate Unemployment Risks in an Emergency (SURE). With a budget of 100,000 million euros in the form of loans from the EU to member countries, SURE is designed to mobilize financial resources to cope with increases in public spending in order to preserve employment. It is an element to protect citizens and alleviate the negative socioeconomic consequences of the pandemic, from which Spain has already received 21,300 million euros, with which it finances, for example, the ERTEs.
In addition, the European Investment Bank (EIB) approved the establishment of a Pan-European Guarantee Fund endowed with 25,000 million euros to face the economic consequences 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 mobilize up to 200,000 million euros in loans.