The European Union (EU, Union) is in a phase of multiple transitions: transitioning from a carbon-based economy towards a green one; transitioning from an internal market focussed European Commission (Commission) towards a geopolitical one; and transitioning from an EU budget based on Member State contributions towards one based on issuing joint debt. A crucial part of this transition is the Next Generation EU Fund (NGEU) which was agreed by the European Council in July 2020 and adopted in December 2020. The NGEU is a milestone for the Union as it allows it to issue joint debt and support the recovery in the Member States with €750 billions of additional funds from 2021 to 2026.
The DCU Brexit Institute is the host of the 3-year, EU-funded Jean Monnet Centre of Excellence REBUILD (Recovery of Europe, Budget of the Union: Integration, Law & Democracy). The core idea of this research project is to explore the NGEU’s governance, values, and resources. The NGEU was established in response to the economic and social challenges posed by the Covid-19 fallout in Europe. It has several legal, constitutional, and political features that shape its components, governance, and the issues of accountability and conditionality. This is, therefore, a cutting-edge research project at the forefront of social sciences that explores the NGEU and the evolving role of the EU in the 21st century.
The legal foundation of the NGEU is provided by the European Council’s decision in July 2020 and its adoption by the Council of the EU in December 2020. Subsequently, several EU regulations and implementing rules were adopted, which give texture to the actual working and functioning of the NGEU. These legal instruments set out the framework, objectives, and operational details of the NGEU.
First, the NGEU consists of various funding programs and instruments. The main component is the Recovery and Resilience Facility (RRF Regulation), which provides grants and loans to support Member States’ investments and reforms. Other components include the ReactEU Program (a top-up to the 2014-2020 European Regional Development Fund and European Social Fund allocations), the Just Transition Fund (Pillar I of the Just Transition Mechanism), the Rural Development Fund (Pillar II of the EU’s Common Agricultural Policy), REPowerEU (aiming to increase the resilience of the European Union energy system, by decreasing fossil fuel dependency and diversifying energy supplies) and further technical assistance and administrative support services.
Second, the governance of the NGEU involves a combination of EU-level institutions and national authorities. The Commission plays a central role in the management and coordination of the fund, a revolutionary feature as it gives the Commission vast new oversight powers. The Commission proposed and implemented relevant Regulations and will monitor the use of the funds. The Member States prepared and submitted their National Recovery and Resilience Plans (NRRPs), which outlined their reform and investment priorities to access NGEU funds. After applicable scrutiny, those plans were approved by the Commission in 2022, and the Commission subsequently monitors the achievement of milestones and targets within those plans.
Third and most importantly, the NGEU includes a vital accountability aspect. The NGEU strongly emphasises accountability to ensure the transparent and efficient use of funds. The Commission is responsible for monitoring the implementation of NGEU programs and ensuring compliance with the previously agreed milestones and targets. Member States are required to report on the progress of their NRRPs and provide information on the use of funds. This is a new and innovative approach. Finally, the European Parliament (Parliament) plays a role in oversight and scrutiny, reviewing the Commission’s reports and conducting inquiries.
Fourth, the NGEU also includes a strong conditionality dimension. The NGEU introduces a new dimension of conditionality to promote the rule of law and sound economic governance. It requires Member States to respect the EU values, including the rule of law, democracy, and fundamental rights. Compliance with these principles is a prerequisite for accessing NGEU funds. In case of serious breaches, the EU can activate the Conditionality Regulation and suspend the payments of EU funds – as happened with Hungary in 2023.
Ultimately, the NGEU has shifted the political dynamics in the EU. The NGEU has significant political implications as it involves negotiations, cooperation, and consensus-building among the Commission and the Member States. It has given the Commission a much more significant role, power, and increased leverage when negotiating with Member States. This should be welcomed as it allows the EU to safeguard its values on the Member State level.
To sum up, NGEU represents a unique financial instrument with legal, constitutional, and political dimensions. The NGEU will change the EU for years to come. Its governance involves both EU and national authorities. Accountability mechanisms are in place to ensure transparency, efficiency, and quality. The introduction of conditionality enhances the EU’s role in promoting the rule of law and democratic values within the Member States; the NGEU will therefore allow the Union to guard its values in the future. The Jean Monnet Centre of Excellence REBUILD will continue to monitor, analyse, and assess the NGEU’s role and significance in the future.
* Niels Kirst is an Assistant Professor of European Law at Dublin City University (DCU). He teaches master-level courses in EU Institutional Law and EU Law & Brexit. His research interests lie in European constitutional law, EU-US comparative law, law & technology, trade law, geopolitics & foreign policy. He holds two master’s degrees in European and International Law from the University of Paris (Assas) and Toulouse (Capitole). Earlier on, he graduated with a Bachelor of Philosophy & Economics from the University of Heidelberg. He previously worked in the German Parliament, researched at the European Court of Justice, and interned at the German Foreign Office. Since September 2019, he has pursued doctoral research in European law at Dublin City University with Professor Fabbrini. In 2021, he won a YERUN Visiting Fellowship at Essex Law School with Professor Kostandinides. In 2022, he was awarded a KAS Visiting Fellowship at Cardozo Law School with Professor Rosenfeld.
The views expressed in this blog reflect the position of the author and not necessarily that of the Brexit Institute Blog.