We are looking forward to a summer full of events-key events for European funds in the difficult context of a government crisis. What will happen?
What was supposed to happen this summer
As we have explained and will explain further in future articles, this summer is shaping up to be particularly important for the deployment of European funds in Italy: indeed, we are in the most important phase of the implementation of the reforms and actions in the NRP And approval is expected of ROPs, NOPs e Of the National Strategic Plan, necessary for the implementation of Structural Funds and Agricultural and Rural Funds.
What will happen to European funds in light of the current government crisis?
September 25 has been identified as the date for the next general election. In addition to the conclusion of a government term born under the banner of good use of European funds, the crisis thus kicks off an election campaign that will absorb part of the time of many political and institutional representatives. The first session of Parliament will be held near October 15, and it will take some time for a new government to be formed, voted on and installed.
In the meantime, the current government will remain in office to take care of “current business”: it will be able to continue to implement expiring measures that are already planned or necessary to avert crises or more serious problems for the country. On the one hand, this definition is flexible and can include what is necessary for the implementation of the NRP and the programming of European funds. On the other hand, the transition phase and the prospect of a new government (resulting from elections that are expected to be politically hard-fought) will create strategic uncertainties and operational slowdowns in the management of European funds.
The government crisis also directly touched the initiatives promoted by our Guide, postponed to the fall precisely because the prospects regarding European funds in Italy are currently undermined by highly unstable and uncertain institutional framework.
The main node: the NRP
Let’s start with the first, most obvious and important of the possible critical issues: the execution of the PNRR.
The PNRR is the main source of European funds for Italy in this seven-year period: it has a unique nature and is the result of a period of particular economic and health distress, as a result of which our country was granted an exceptional allocation of funds in the European Union, intended as a driver for reforms and investments. The NRP is “worth” about 200 billion euros (including grants, loans and national co-financing), or about half of all the resources attributable to European funds in Italy in recent years.
Unfortunately, the execution of the NRP and related resources run risks. In fact, as mentioned by the Prime Minister himself and the Minister for Relations with Parliament in the outgoing government (as well as in many of the our articles on the subject ), the disbursement of NRP funds takes place in “tranches,” conditioned on compliance with a complex system of indicators ( milestones and targets ) related to the implementation of PNRR measures ( investments e reforms – of which you can follow here the progress).
The reforms need broad parliamentary agreement and government intervention to be launched, formulated, approved and operationalized. The interventions provide a key-role by government structures, both as Title Administrations (Ministries and the Prime Minister’s Office are ultimately responsible for implementing all measures) and as Implementing Parties (central governments are operationally responsible for initiating and implementing about one-third of the interventions). The disbursement of NRP funds therefore needs a cohesive, effective and, as it were, healthy government and parliament.
Why PNRR execution is at risk
In the current situation, the outgoing government structures (ministries, Council Presidency and NRP governance structure ) will have more difficulty and less focus in launching and managing the interventions, that is, in many cases, large infrastructure investments of strategic and multi-year scope. Of which, for PNRR purposes, it is not only necessary to track the good use of funds, but also the actual achievement of goals and results.
The government and Parliament (within which there have been major political rifts) will find it difficult to launch, approve and implement the reforms, on which laborious agreements had already been reached. A resigning government struggles to impose a vision on a divided Parliament on reform issues that are particularly “hot” in the political debate. For example, it cannot use the instrument of trust to facilitate the conversion of decree-laws by Parliament.
The tranches of NRP funds that could be at risk in the upcoming institutional “vacation” period are the June tranche (21 billion), currently to be collected after 45 targets are met, and the December tranche (19 billion), subject to the achievement of another 55 targets; in addition to all subsequent tranches, which will give the measure of the effectiveness of the next government in office. The current government was wanted by a large majority for the specific purpose of addressing the NRP challenge. Which has been started not without difficulty, but by hitting the first targets: the adoption and approval of the NRP on time, the start of reforms and investments, and the disbursement, to date, of about 46 billion euros.
The current crisis leaves pending (at various stages of the process of conversion into law and implementation) many measures and reforms that are binding for the purpose of disbursement of NRP tranches of funds. Measures and reforms concerning, for example, research, hospitalization and care institutions, tax justice and process, industrial property code, competition, criminal trial, judiciary, entertainment, infrastructure, mobility, highway concessions and infrastructure, and acceleration of administrative judgments and tax simplifications.
The other possible negative effects
These negative effects, which are particularly obvious and immediate, are accompanied by other potential critical issues, which may manifest themselves to varying degrees depending on how the political situation develops.
As mentioned in the past , Italy’s track record in terms of effective use of European funds (and in general, of public funds) are not encouraging. Italy uses European funds less effectively than other countries and has a high public debt, which is partly the result of public spending that has failed to produce positive and sustainable effects over time.
A government of national unity and credible in the European arena was perceived (from the very beginning of its formation) as an important condition for giving confidence to European observers concerned about such backgrounds, for gathering the necessary consensus for far-reaching reforms, and for effectively juggling the technical management of the NRP. New political balances (or imbalances) may not lead to the same conditions, with the risk of losing a unique opportunity in terms of resources and tools for making investments and reforms.
A risk perspective on these issues (however unrealized) may have further very negative effects. It would worsen Italy’s prospects in terms of growth and public accounts, with the possible start of a downward spiral, in an international conjuncture that we know is particularly critical.
In addition, as already mentioned , a bad or “unprofitable” use of resources under the NRP does not only imply waste, but poses the additional problem “ of having to repay debts for which the expected return on investment has not been realized in returns “.
Finally, NGEU had inaugurated a new “concept” of European funds , effectively paving the way for the so-called “Eurobonds,” which our country has long strongly desired. A possible failure of the PNRR in Italy would also be a strategic failure of a vision of Europe from which we all benefit (or would benefit).
Structural and rural funds
Different, though not positive, is the situation with regard to Structural Funds ( ERDF , ESF+ ) and Rural Funds ( EAFRD , EAGF ).
A possible impact of the government crisis may exist to the extent that: 1) One part of the management of Structural Funds, that relating to NOPs, is entrusted to the management of the relevant ministries in the various thematic areas; 2) Starting next year, the Ministry of Agriculture will have a stronger role in the management of agricultural and rural funds, as part of the reform of the “new CAP” 2023-2027.
Thus, adjustments and delays are possible both in the launching of calls and actions under the NOPs; and in the finalization, launching and use of funds from the “new CAP.”
Fortunately, the Partnership Agreement that regulates at the national level the use of Structural Funds has recently been approved . L’approval of the ROPs and NOPs by the European Commission should be completed between July and September.
Conversely, exchanges between the Ministry of Agriculture and the European Commission on the finalization of the new CAP National Strategic Plan are still ongoing.
A great hope
As we have repeatedly mentioned, the Recovery and Resilience Device and the NRP represent an opportunity not to be missed. Losing it would objectively have serious consequences, in terms of missed opportunities and subsequent systemic repercussions.
We hope that the hope in the effective use of this opportunity will remain alive and materialize, even in the changed political scenarios, and that our institutions will be able to honor our country’s vision and planning capabilities.
