Policy Brief on the Future of the Recovery and Resilience Facility (RRF) in the Next EU Budget

The creation of the Recovery and Resilience Fund (RRF) as a response to the pandemic was an unprecedented step in the development of the European Monetary Union. It represents the creation of an important fiscal risk-sharing mechanism aimed at fostering economic recovery and enhancing long-term sustainability through public investments in the green and digital goals and structural reforms. This policy brief identifies four main functions of the RRF and char-acterises how successful it was in delivering on them: To serve as a fiscal stimulus and financial market stress reduction tool; to protect public investments; to facilitate the green and digital transition; to serve as an engine of structural reforms. Some challenges have crystallised, how-ever, throughout the implementation of the RRF related to shortcomings in its design: The lack of flexibility to adjust National Recovery and Resilience Plans in light of multiple shocks related to inflation, geopolitical developments, new priorities in member states and government changes. The performance-based approach and the bundling of multiple reforms and invest-ments require rethinking and cannot be implemented in the same way in the next Multiannual Financial Framework. Joint issuance of debt, however, has been rather successful and needs to be considered further.