EU’s €800bn recovery fund held back by red tape, industry chief warns

The showpiece €800bn EU programme intended to fund the digital and green transitions has been hobbled by red tape, according to one of the bloc’s leading industrialists, as data indicates that less than a third of the resources have so far been disbursed.

Jean-François van Boxmeer, head of the European Round Table for Industry lobby group, said the NextGen EU recovery fund — often touted as a European precursor to US President Joe Biden’s Inflation Reduction Act — was “very, very difficult” to access. Instead, he suggested the EU should revamp its approach to big infrastructure projects.

The recovery fund, agreed as an economic response to the Covid-19 pandemic and financed by common borrowing that some capitals insist should remain a one-off, is halfway through its planned 2021-26 timespan. But as of December it had disbursed only about 30 per cent of available grants and loans, according to EU data.

“There are a lot of hurdles and criteria to meet,” van Boxmeer, who is also Vodafone chair, said in a Financial Times interview. “People are lost in the complexity of the offer. The intention is good but people are lost . . . Look at the take-up.”

The ERT says its members include the chief executives and chairs of about 60 of Europe’s largest industrial and tech companies.

Under the recovery fund’s design, disbursements depend on whether national governments meet targets set by the European Commission, often involving the passage of legislation. Just 18 per cent of those so-called milestones have been fulfilled, according to EU data.

Some countries, notably Poland and Hungary, have not touched the bulk of the funds, due to concerns over rule of law violations. Others including Italy, the largest recipient of recovery funding, have requested more time to spend it because of delays in disbursement.

The recovery fund was “fragmented” and suffered from a “complete lack of European design” because it was an emergency response to the pandemic aimed at accelerating existing national projects, said Simone Tagliapietra, senior fellow at Brussels-based think-tank Bruegel.

But the commission said the decision on how to spend the resources rested with EU member states, which were “overall well on track” over implementing the fund. It added that “many successful schemes [were] benefiting industry” in countries’ national spending plans.

The fund, and the hoped-for boost stemming from disbursement, are seen as a landmark achievement of commission president Ursula von der Leyen and her most significant contribution to the bloc’s economic development.

Van Boxmeer suggested the EU should consider spending directly on infrastructure projects that benefit all of Europe, such as international electricity grid connections, rather than channelling funding through member states.

“The ERT does not have a consensus on this,” he said. “But in my opinion . . . it is something we have to think about.”

He added that industry wanted to see “more Europe, but a different Europe” after elections to the European parliament in June.

In particular, business is demanding that Europe take a more integrated approach to energy, where EU companies face substantially higher costs than rivals in the US or China.

The commission said direct EU support for projects such as cross-border energy infrastructure was “highly effective” but that programmes based on national plans, such as the recovery fund, were a “complementary” approach.

But Tagliapietra at Bruegel said the EU needed a “strong common budget” for public goods such as electricity interconnections between member states — and that such a co-ordinated approach would reduce investment costs.

In a study for the ERT, Boston Consulting Group estimates that the investment needed in energy transport infrastructure will total €800bn to 2030, rising to €2.5tn by 2050.

“The scale of the energy transition demands fresh consideration of how best to build a European energy market that works for all Europeans,” van Boxmeer said. “At the same time our growth is sluggish. To pay for all that you need more growth.”

The ERT considers that the priority for the next commission should be to boost growth through completing the single market, which it says is still constrained by some 100 non-tariff barriers.

European industry had lost substantial ground to the US and China over the past 20 years, van Boxmeer said. “Improving the single market is . . . hard work. It is not about throwing a lot of money at things.”

Europe was facing a “Delors” moment, he added, referring to the late Jacques Delors, former commission president and architect of the EU’s single market.

“He came at a time when European competitiveness was also being challenged. The early 1980s were not glorious years. This is a Delors moment where you have to push [integration] a little further.”

Additional reporting by Andrew Bounds in Brussels