The European Central Bank published an updated preliminary evaluation of the economic impact of the EU’s Next Generation EU programme, focusing on the Recovery and Resilience Facility. ECB staff estimate that RRF-linked public spending and structural reforms could lift the level of euro area GDP by 0.4% to 0.9% by 2026 and by 0.8% to 1.2% by 2031 relative to a no-programme baseline, while euro area inflation effects are expected to peak at around 0.1 percentage points. The update finds that implementation delays have shifted much of the impact into the second half of the programme, with an estimated 0.1% to 0.2% increase in euro area GDP in 2021-2023. Next Generation EU was initially budgeted at over EUR 800 billion, with the RRF accounting for almost EUR 724 billion (up to EUR 338 billion in grants and nearly EUR 386 billion in loans), and Member States had applied for EUR 650 billion in RRF funds as at 26 August 2024. For the euro area, the analysis uses an estimated EUR 486 billion of RRF-funded expenditure (out of an entitlement of up to EUR 532 billion) and assumes that around 80% is additive to national plans, with spending largely in government capital expenditure and green and digital commitments averaging 42% and 27% respectively. By August 2024 the European Commission had borrowed over EUR 320 billion and paid EUR 265.4 billion to Member States, and total RRF disbursements exceeded EUR 238 billion; the article links under-execution to administrative capacity constraints and post-2021 supply bottlenecks and inflation affecting procurement. Debt-sustainability simulations still point to favourable debt-to-GDP effects for the main beneficiaries, but the estimated impact for Italy and Spain by 2031 is revised down to around 7-8 percentage points, reflecting slower implementation and lower near-term potential output effects. All RRF milestones and targets must be completed by 31 August 2026. The assessment notes that euro area countries had fulfilled around 40% of reform-related milestones and targets by early September 2024 and that only about one third of envisaged payment requests had been submitted. The Commission’s net issuance for NGEU is expected to continue until end-2026 at an estimated pace of around EUR 150 billion per year, while repayment of borrowing for the grant component is estimated to peak at around EUR 26 billion in 2028 and to run until 31 December 2058.
European Central Bank 2025-01-07
European Central Bank updates evaluation of Next Generation EU and projects euro area GDP 0.4–0.9% higher by 2026
The European Central Bank's evaluation of the EU's Next Generation EU programme, focusing on the Recovery and Resilience Facility (RRF), estimates euro area GDP could increase by 0.4% to 0.9% by 2026 and 0.8% to 1.2% by 2031. Implementation delays have shifted much of the impact to the latter half, with GDP growth of 0.1% to 0.2% in 2021-2023. Despite administrative and supply challenges, debt-sustainability simulations remain favorable, though Italy and Spain's projected benefits are revised down to 7-8 percentage points by 2031.