An overview of the economics of the Recovery and Resilience Facility

Emiel Afman, Steven Engels, Sven Langedijk, Philipp Pfeiffer and Jan in 't Veld

Quarterly Report on the Euro Area (QREA), 2021, vol. 20, issue 3, 7-16

Abstract: The Recovery and Resilience Facility (RRF) is the centrepiece of Europe’s recovery plan, NextGenerationEU, financed by a temporary increase in the EU’s budget (the multiannual financial framework, 2021-2027). The macroeconomic package covers both structural reforms and public investment aiming to mitigate the economic and social impact of the COVID-19 crisis and make European economies and societies more sustainable, resilient and better prepared for both the challenges and opportunities of the green and digital transitions. Economic modelling indicates that the RRF will have a sizeable and persistent positive impact on overall EU GDP and will promote convergence. Spillover effects benefit open economies with smaller grant allocations and growth helps reduce debt, also in the long term. In addition to these simulated effects of the fiscal impulse, structural reforms can substantially support medium-term and long-term growth by increasing labour market participation, enhancing allocative efficiency or improving the business environment. The adoption of the RRF -combined with other policy action - has also generated additional benefits by reducing risk premia and by stimulating consumer spending and investment. For Member States to fully benefit from the projected growth effects, the planned high-quality investments must be made swiftly and in a way that amplifies current national public investment plans. It is also essential that Member States meet the ambitious commitments to structural reforms they made in their recovery and resilience plans to reap the full benefit of the RRF (1).

Keywords: Euro area; COVID-19 pandemic; RRF; Recovery and Resilience Plan; QUEST (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://economy-finance.ec.europa.eu/system/files/ ... 7_en_chapter%20I.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:euf:qreuro:0203-01

Access Statistics for this article

More articles in Quarterly Report on the Euro Area (QREA) from Directorate General Economic and Financial Affairs (DG ECFIN), European Commission Contact information at EDIRC.
Bibliographic data for series maintained by ECFIN INFO ().