For the Court of Auditors too many delays in the expenditure of React-EU. Possible “osmosis” between Pnrr and cohesion funds

Listen to the audio version of the article

Italy is having difficulty spending React-EU funds. This is what emerges from the latest report by the Court of Auditors on financial relations with the European Union and the use of Community funds. The analysis comes less than a year after the closure of the 2014-2020 programming cycle, the funds for which can be spent by 31 December 2023. At the end of 2022, the spending targets envisaged to avoid decommitment of resources have been achieved, but despite this reassuring figure, the Court observes that the percentages of annual increase in commitments and expenditure are often single-digit and therefore represent a wake-up call on Italy’s ability to spend cohesion funds by the end of this year. In particular, the low absorption capacity of React-EU’s additional funds, allocated to allow member states to react to the pandemic, casts doubt on the country’s ability to absorb additional resources compared to ordinary programming.

React-Eu

From 2021, the original ERDF (European Regional Development Fund) and ESF (European Social Fund) funds have been integrated with resources from the 2021-2027 cycle linked to the React-EU initiative with the aim of overcoming the effects of the crisis healthcare. In 2022, again as part of the React-EU initiative, an additional 3 billion was allocated to the cohesion policy with the aim of overcoming the crisis caused by the pandemic and activating a green, digital and resilient economic recovery. According to the Court’s analysis as of 31 October 2022, only six national programs (PON) out of eight beneficiaries have started to use the React-EU supplementary funds. The PON Metropolitan cities represents a virtuous case with 143% of commitments made and payments at 97% (ESF quota), while the PON inclusion is stuck at 18% of commitments made and even zero for payments. The PON Governance and Institutional Capacity and the PON Systems of active employment policies are not among the programs that have financially implemented React-EU. Overall, the resources assigned to Italy under React-EU amount to 14.4 billion to be spent by 31 December 2023.

From 2021 Italy receives more than it pays to the EU

Alongside the analysis on the use of EU funds, the central element in the Court’s analysis concerns the change in Italy’s position vis-à-vis the EU in terms of contribution. In 2021, thanks to the Next Generation Eu funds through the Pnrr, Italy has in fact become a net beneficiary of the EU budget, that is, it has received more than it has paid. In 2021, payments to the EU amounted to 18.1 billion (-0.4 billion compared to 2020) while it received around 26.7 billion from the EU, 10 of which came from NGEU. This is an increase of 129% compared to 2020, which drops to 41.7% if NGEU’s share is excluded.

Pnrr and classic ue funds: an osmotic evolution possible

But the evolution does not only concern the amount of resources available to member states. According to the Court, NGEU changed the very structure of the EU financial system, which from “closed” – i.e. limited to the flows of income and expenditure between member states and the EU – was opened to financing from the market. The rules for accessing the funds of the Pnrr and those of the cohesion policy are, to date, different. However, the Court underlines how the Pnrr method, which could be extended beyond 2026 to allow for tackling the energy emergency, has also already been implemented by some regulations of shared management funds, for example by the consolidation of the “single Audit approach” that shifts the focus from the spending process to the project outcomes. According to the Court, an “osmotic” evolution between the classic system of European funds and the one being tested with Next Generation Eu is possible.