18 April, 2024 | Daniele Caramani and Lorenzo Cicchi
RELIEF VS REFORM IN NATIONAL RECOVERY AND RESILIENCE PLANS
The recovery plan implemented in response to the economic crisis triggered by the Covid-19 pandemic represents the European Union’s most ambitious financial effort to date. This unprecedented initiative involves the issuance of debt by the EU for the first time, serving as a secure asset to support the economic union.
While grounded in a shared European will and solidarity, divergent perspectives on how member states should allocate these extraordinary resources are expected to emerge. These differences in vision are expected to manifest geographically, between member states, and functionally across various socio-economic interests and ideological positions.
To explore this question, our recent REGROUP research paper The relief–reform divide: An analysis of national responses to covid-19 in seven EU Member States’ recovery plans investigates, through holistic text analysis, how the seven largest recipients of the EU’s Recovery and Resilience Facility—France, Germany, Greece, Italy, Poland, Romania, and Spain—prioritize allocating these funds through their respective national recovery plans (NRRPs), in particular looking at the dualism between more “relief-oriented” and “reform-oriented” spending preferences.
GAUGING SPENDING PREFERENCES IN SEVEN COUNTRIES
Our analysis is premised on the idea that the distribution of funds in each country is not dictated by technical assessment alone but also by the competition and balance between diverging socio-economic interests mobilized by the main actor in charge of implementing recovery plans, namely national executives.
In formulating its recovery plan, each executive, and the main parties in it, may prioritize either technocratic long-term expenditures on structural reforms (responsibility-driven governance) or more politically rewarding short-term measures for the relief of economic sectors in distress (responsiveness-driven governance). Our main hypothesis is that, while the former option is preferred by governments representing interests of sectors not affected by pandemic-related closures, the latter is preferred by those interested in providing immediate relief to socio-economic sectors that have been hit by closures, even when these have already received benefits that have been unable to mitigate the negative impact of the pandemic.
In our empirical analysis, we perform a qualitative holistic text analysis, based on a novel conceptualization of the relief–reform divide, on the seven national proposals, submitted to the European Commission in April-May 2021. On the basis of a coding scheme identifying dimensions and types of policy priorities linked to relief and reform objectives, native speaker country experts identified sentences distinctly supporting one of the two types of policy priorities in each of the six policy domains (pillars) of the Recovery and Resilience Facility.
THE IRON LAW OF EU CONDITIONALITY
Given the presence of fewer constraints compared to previous crisis management tools, one could expect national recovery and resilience plans to diverge substantially in their relief- or reform-oriented spending preferences, according to the national political dynamics guiding them. Instead, our analysis shows that plans are mostly focused on investment, with a long-term time horizon, and focused on responsibility rather than responsiveness. Ultimately, and regardless of the political composition of the government approving them, these are reform-oriented technocratic plans—albeit with a few country-specific differences regarding the specific sectors to which resources are allocated. In sum, it appears that EU conditionality keeps working effectively, even in its “expansionary” rather than “austerity-based” mode.
In terms of policy domains, the true transformative scope of the whole RRF plan seems to be in the digital transition of pillar 2, which is both very reform oriented and substantial in terms of budget allocation. On the other hand, the green pillar—accounting for the biggest share of the budget—can be seen as a missed opportunity, as it is relatively more relief-oriented (i.e. dominated by short term market incentives aimed at consumption habits change)
It is important to note, however, that this analysis takes into consideration only the first NRRPs submitted to the European Commission in Spring 2021. More leeway is expected in how to spend the money at the later implementation stage, emphasizing cross-country differences. In this regard, an avenue for further research would be to analyze the divergence in subsequent amendments of the RRF documents, as well as the capacity of governments to meet guidelines, and therefore achieve disbursement of funds.
This article highlights some of the findings in the REGROUP paper “The Relief–Reform Divide: An analysis of national responses to covid-19 in seven EU Member States’ recovery plans”.
