Insight Investment

NGEU funding is benefiting Southern and peripheral European countries

Adopted in December 2020, NGEU is an economic recovery package launched by the European Commission to help member states recover from the impact of the pandemic.

The package provided funding of up to €750bn, financed by debt jointly guaranteed by EU member states, and operates until 2026. It includes loans and grants aimed at modernising the economies of EU member states for the next generation. This included enhancing education and skills, creating greener economies, and reforming common policies such as the Common Agricultural Policy.

In February 2024, the European Commission provided a mid-term evaluation of the Recovery and Resilience Facility, the key instrument within the €750bn NGEU plan. The Commission found that, as a result of NGEU, public investment in the eurozone increased from 3% of GDP in 2019 to an estimated 3.3% in 2023, and it is expected to rise to 3.4% in 2024. The European Commission economic modelling suggests that NGEU has the potential to increase real GDP across the EU by 1.4% in 2026 relative to where GDP would have been had the programme not been implemented.

Italy and Spain have benefited the most from NGEU funding

Italian Prime Minister Giorgia Meloni, voted into office in October 2022, quickly embraced the Italian National Recovery and Resilience Plan (NRRP), which was drafted by the previous Mario Draghi-led government and approved by the European Commission in mid-2021. This provides Italy with €191.6bn in grants and loans from the NGEU instrument, making it the largest beneficiary of funding in nominal terms (see chart below), representing over 10% of Italian GDP. These payments are made in tranches, and at the current fourth tranche of funding Italy has received just over €101bn, with Spain in second place, receiving over €38bn of its allocation.

Figure: Italy has been the primary beneficiary of NGEU funds

Source: https://www.ngeutracker.org/