To amortise the pandemic aftermath in 2020, the European Union provided a stimulus package worth EUR 2 trillion. The package consists of the EU’s long-term budget for 2021 – 2027 of EUR 1.2 trillion, enhanced by NextGenerationEU at a value of EUR 807 billion. This budget is split into two types of fundings: grants and loans, some EUR 338 billion will be provided in the form of grants, while EUR 386 billion will be used to provide loans from the EU to individual Member States with favourable conditions.
NextGenerationEU is a European instrument specifically designed to help repair the immediate economic and social damage caused by the coronavirus. Its long-term goal is to make the EU greener, more digital, more resilient and better prepared for the forthcoming challenges. The cornerstone of NextGenerationEU is the Recovery and Resilience Facility – an instrument that provides grants and loans to support necessary reforms and investments within EU Member States. The funds from the instrument will be distributed according to national recovery and resilience plans set up by individual member states, in cooperation with the European Commission and in line with an agreed allocation key. The European Association of Innovation Consultants (EAIC) has released its first collective report “A Guide to Next Generation EU for industry to better understand and seize its opportunities.” The guide currently covers 21 countries, however, EAIC intends to regularly update this guide and incorporate new sections to facilitate the identification of opportunities for industry. The purpose of the guide is to help EU industry, present in multiple EU countries, identify the priorities to facilitate the recovery of each member state. Although national plans are usually available in each local language, the guide summarises the plans in English and allows for more transparency.
One of the traditional programmes, funded under the multiannual financial framework for the next 7 years, is Horizon Europe 2021-2027. It is the EU’s key funding programme for research and innovation with a budget of over EUR 95 billion. Its main goal is to tackle climate change and accomplish the UN’s Sustainable Development Goals, while boosting the EU’s competitiveness and growth. The main research and innovation missions are Adaptation to climate change mission;, Cancer mission, Climate-neutral and Smart Cities mission, Soil deal for Europe mission and Restore our oceans and waters mission. Horizon Europe views digital transformation and green transition as priority objectives, which can be identified as the most important cross-cutting priority areas, along with NextGenerationEU. While Horizon Europe (2021-2027) is is framed within the Multiannual Financial Framework (MFF), NextGenerationEU (2021-2023) is a temporary recovery instrument put in place to boost, through investment and reform financing, the recovery of Member States’ economies in the wake of the pandemic.
NextGenerationEU has a temporary investment role and it covers a wider field of priorities such as the green transition, digital transformation, smart, sustainable, and inclusive growth, social and territorial cohesion, health and economic, social and institutional resilience and policies for the next generation, children and the youth, such as education. Its focus is placed on seven key features: Power up, Renovate, Recharge and Refuel, Connect, Modernise, Scale-up, Reskill and upskill.
Furthermore, NextGenerationEU will strengthen several existing EU programmes and policies:
- REACT-EU, Recovery Assistance for Cohesion and the Territories of Europe;
- Just Transition Fund, directed to guarantee that the transition to climate neutrality works well for all;
- European Agricultural Fund for Rural Development, aimed to further support farmers;
- InvestEU, designed to support the investments;
- rescEU, safeguards for the EU Civil Protection Mechanism to respond to comprehensive emergencies;
- Horizon Europe, aimed to make sure the EU has the capacity to fund excellence in research.
Financing
To avoid immediate pressure on member states’ national finances, the EU will borrow from the markets to finance NextGenerationEU, with the repayment period taking place until 2058. Approximately 50% of NextGenerationEU’s budget will be spent on research and innovation via Horizon Europe, the Just Transition Fund, the Digital Europe programme, the Recovery and Resilience Facility, RescEU, and EU4Health.
Below, a detailed breakdown of the Next Generation EU 2021-2023 and the regular Multiannual Financial Framework 2021-2027 is shown:
Around 30% of the long-term budget and NextGenerationEU will be spent on fighting climate change. These funds are part of a major investment plan that the EU will put in place for a sustainable green economy. It will combine EU and national public funds, but also public and private investments to support the EU on its path to climate neutrality by 2050.
The remaining 20% of the Recovery and Resilience Facility funds will be invested in the digitalisation of the EU. These funds support investments in supercomputing, artificial intelligence, cybersecurity, advanced digital skills and the wider use of digital technologies across the socioeconomic spectrum.
Horizon Europe (HE) has a budget of EUR 95.5 billion from 2021 to 2027. This amount includes EUR 5.4 billion from the Next Generation EU instrument. HE’s budget is divided among four pillars and 15 components, creating a programme that will support all the areas of Research and Innovation: excellent science (ERC, MSCA…); global challenges & industrial competitiveness (health, creative, digital, space,…); innovative Europe (EIC, EIT,…) and widening participation & strengthening the European Research Area.
In conclusion, the two funding programmes are closely interlinked. First, they have similar objectives and challenges that are urgent in the wake of the SARS-CoV-2 virus situation. Second, they are financially related, since NextGenerationEU’s extraordinary funds will reinforce the regular Horizon Europe funds for the period 2021-2023.
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