Lessons learned from the Recovery and Resilience Facility for a future European fiscal capacity

Policy Brief

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 by the Foundation for European Progressive Studies (FEPS), the Friedrich-Ebert-Stiftung (FES) and the Austrian Institute for Economic Research (WIFO) identifies four main functions of the RRF and characterises how successful it was in delivering on them.

The author, Atanas Pekanov, Economist at the WIFO Institute and the Vienna University of Economics and Business, and former Deputy Prime Minister of the Republic of Bulgaria, looks at the extent to which the RRF has:

• served as a fiscal stimulus and financial market stress reduction tool
• protected public investments
• facilitated the green and digital transition
• served as an engine of structural reforms

However, the policy brief also argues that some challenges have crystallised throughout the implementation of the RRF related to shortcomings in its design, including 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.

Therefore, it argues that the performance-based approach and the bundling of multiple reforms and investments require rethinking and cannot be implemented in the same way in the next Multiannual Financial Framework (MFF). Joint issuance of debt, however, has been rather successful and needs to be considered further. 

This policy brief was produced as part of the EU Investment Capacity Group, an initiative by FEPS and FES to stimulate the elaboration of policy proposals within the progressive family around the next MFF. A draft of this publication was presented and discussed with the Group at FEPS HQ on 20 May 2025.