Cyprus lagging behind in EU recovery fund requests

The European Court of Auditors on Tuesday raised concerns about the slow absorption of the Recovery and Resilience Facility (RRF) funds across the European Union, warning of potential risks to project completion within the planned timeline.

According to the ECA’s latest report, the funds aimed at boosting economic recovery following the pandemic are entering the real economy at a slower pace than anticipated.

As of the end of 2023, Cyprus had only submitted 40 per cent of the payment requests outlined in the indicative schedules of its operational arrangements, compared to the EU average of 70 per cent.

Additionally, only 8 per cent of the allocated funds for Cyprus had been disbursed, with just 5 per cent of the milestones achieved. This corresponds to 14 out of a total of 271 milestones.

The report highlighted that by the end of 2023, EU member states had drawn less than one-third of the recovery funds they were entitled to, with final recipients receiving only about half of the funds transferred from Brussels to national treasuries.

The ECA pointed out that delays, which occurred during the first three years of the RRF’s implementation, are jeopardising the mechanism’s overall objectives.

In response to the report, the European Commission acknowledged the findings, describing the report as “generally positive.”

A commission spokesperson reiterated the importance of the RRF, emphasising the commitment to fully utilise the facility by its deadline in 2026.

“We are working closely with member states to support the timely and effective absorption of RRF funds, ensuring that they reach citizens and businesses as quickly as possible,” the spokesperson said.

The RRF, which was established in February 2021 with a total value of €724 billion, is designed to finance reforms and investments across EU countries, focusing on key areas such as the green transition and digital transformation.

However, the auditors warned that the delays in fund absorption could lead to a bottleneck in project implementation towards the end of the RRF’s period, increasing the risk of inefficient or misdirected spending.

Furthermore, despite a slight acceleration in payments by the European Commission, it remains uncertain whether all member states will be able to fully absorb the funds and complete the planned measures before the facility’s expiration in August 2026.

The report also said that while many countries prioritised reforms over investments, the concentration of investments towards the end of the RRF period could exacerbate delays.

The European Court of Auditors also stated that by the end of 2023, member states had submitted payment requests covering less than 30 per cent of the over 6,000 milestones and progress indicators, with the remaining milestones likely being the most challenging to achieve.

In addition, the report cautioned that substantial funds could be disbursed even if member states fail to fully implement the corresponding measures.

This risk arises because the current rules do not permit the recovery of funds in cases where milestones have been met, but the associated projects remain unfinished.

Finally, it should be noted that the auditors conducted on-site visits in Spain, Italy, Slovakia, and Romania as part of their evaluation.