Southern and Eastern European countries are expected to receive the most EU funds over the period 2021-2027
These funds will help countries in Southern and Eastern Europe recover from the pandemic crisis and the economic impact of the Russian-Ukrainian war. The transfers will be particularly relevant for central and eastern European EU member states, Greece and Portugal, which will receive funds representing between 25 and 40% of their 2021 economic outputs.
While recovery funds target Italy and Spain given their Covid-19-induced economic shocks in 2020, cohesion funds, which support long-term economic development goals, as well as agricultural funds , will advance the economic growth of precisely those EU economies most affected by the Russian-Ukrainian war. These include the states of Central and Eastern Europe and the Baltic states, where growth prospects have declined markedly due to high inflation which is dampening domestic consumption.
The EU will pay around €1.2 billion over the period 2021-2027 to its member states
In total, the EU will disburse around €1.2 billion (around 8.5% of EU-27 GDP) over the period 2021-27 via cohesion funding (€387 billion), agricultural policy funds (EUR 261 billion), resources from the previous 2014-20 budget of EUR 255 billion, which can still be disbursed until 2023, and EUR 332 billion in subsidies under the Next Generation EU Recovery and Resilience Facility (NGEU) (Figure 1). These funds represent the most important redistribution mechanisms for advancing the economic recovery and sustainable growth of EU countries.
Figure 1. Main EU redistributive instruments for recovery and growth
However, not all EU Member States should benefit equally
However, not all EU Member States are expected to benefit equally from these funding instruments, reflecting the allocation criteria of each policy, which include the different levels of economic development and social needs of countries, but also the priorities and political realities defining the financial objectives of each policy area.
Italy is by far the largest beneficiary in absolute terms, expected to receive around EUR 185 billion, excluding EUR 123 billion of NGEU loans, followed by Spain (EUR 177 billion), Poland (165 billion euros), France (123 billion euros), Romania (81 billion euros) and Germany (77 billion euros).
Similarly, each instrument benefits an alternative constituent (Figure 2). While the NGEU should benefit Italy and Spain the most in absolute terms since the Covid-19 crisis, the cohesion funds benefit Poland by far the most with EUR 79 billion, followed by the Italy (EUR 43 billion), Spain (EUR 36 billion) and Romania (EUR 32 billion). Conversely, the Common Agricultural Policy still helps France with 46 billion euros, followed by Spain and Germany (31 billion each), Italy (27 billion) and Poland (22 billion).
In total, seven EU Member States receive around 70% of the overall funds, led by Italy, Spain and Poland, each between 13 and 15%, followed by France (10%), Romania (6.5%), Germany (6.3%) and Greece. (5%). The other 20 EU Member States receive around 30% of the combined funding. These figures exclude SURE loans, the temporary instrument to finance employment-related programs during the Covid-19 crisis, and NGEU loans, as they will be repaid by the respective Member States over time.
Figure 2. Main EU redistributive instruments for recovery and growth by Member State
Billions of Euro’s ; % of GDP
The main users of SURE and NGEU loans are the same EU Member States
However, the main users of SURE and NGEU loans are the same EU Member States. Italy received €27 billion for SURE and is set to receive €123 billion in NGEU loans. Spain received EUR 21 billion under SURE, followed by Poland with EUR 11 billion. Other countries have made minimum requests for NGEU loans so far. Besides Italy, these countries include Romania (14.9 billion euros), Greece (12.7 billion) and Poland (11.5 billion). Although all these loans must be repaid, the countries still benefit from low interest rates, which SURE says, according to EC estimates, has saved Italy around 3.8 billion euros. , 1.6 billion euros for Spain, 0.9 billion euros for Romania and 0.5 billion euros. billion for Greece.
Finally, Croatia, Bulgaria, Latvia, Slovakia, Greece, Romania and Hungary will receive between 30 and 45% of their respective 2021 GDP over the period 2021-27, while Poland, Lithuania, Estonia and Portugal will receive between 25 and 30%. For Italy and Spain, the main recipients of EU funding in absolute terms, these figures are still high at around 15% for Spain and 10% for Italy, against around 5% for France and 2% for Germany.
For an overview of all of today’s economic events, check out our economic calendar.
Alvise Lennkh-Yunus is Deputy Head of Sovereign and Public Sector Ratings at Scope Ratings GmbH.