Europe’s €955-billion “Next Generation” recovery fund, launched to rebuild economies after the COVID-19 pandemic, is struggling to fully transform the bloc’s economy, with slow disbursements and bureaucratic bottlenecks hindering its impact.
From Spanish olive groves to Italian vineyards, projects financed by the fund are using AI, drones, and smart sensors to modernize agriculture and improve sustainability. Yet, experts say the fund has largely delivered infrastructure and data systems without establishing long-term business models or securing the necessary talent to sustain them.
“The funds left us with data infrastructure and teams capable of operating AI at scale,” said Juan Francisco Delgado, coordinator of a Spanish agriculture project told Reuters. “What they haven’t left us with is a business model.”
Launched in 2020 to cushion pandemic shocks and promote digitalization and sustainability, the fund represented a historic step for the EU, breaking the taboo on joint borrowing. Over €700 billion in grants and loans were made available in 2021, although some countries later declined part of their allocations. Currently, €182 billion in allocated funds remain undisbursed.
While the European Commission insists the fund has achieved both short- and long-term goals, delays in implementation have limited its economic boost. Italy, for example, revised its €194-billion plan six times, with some adjustments taking nearly a year to negotiate, slowing investment in local authorities and crucial projects like nurseries.
Opposition politicians in Italy and Spain have criticized spending on cosmetic or symbolic projects, including hiking path signs or paint touch-ups in tourist areas, rather than transformative initiatives. Complicated application processes also discouraged smaller businesses from applying for funds, according to Spain’s transport association.
Despite these hurdles, some governments are extending timelines to ensure money reaches the economy. Spain has received approval to use €10.5 billion in recovery fund loans as capital for further state-backed financing, while Italy secured EU backing to spend €23.5 billion beyond 2026. Economists say such flexibility may allow structural reforms to produce longer-term benefits.
“The easiest way to ensure the money reaches the economy would be to extend the programs by 1-2 years,” said Carsten Brzeski, an economist at ING. “Countries should be allowed to deviate from fiscal rules if they implement reforms that bring lasting relief to public finances.”
