Giacomo D’Arrigo, Università di Messina

The legal innovation of Next Generation EU has effectively introduced a new method of governance in the European Union which, with the Treaties unchanged, has an impact on the functioning of the EU institutions and on relations between the EU and its Member States. A distinction can be made between pre – and post – Next Generation EU in that the NGEU governance system can be considered an innovation that is becoming increasingly established and used by the EU for programmes and initiatives. This is the case even when these have different purposes and beneficiaries (whether Member States or third countries, such as Ukraine, albeit with candidate status) or different objectives (energy security and balance; climate transition; support for a country at war; debt sustainability and growth).

REPowerEU, the Social and Climate Fund, the Instrument for Ukraine and the new SGP, despite having different legal bases, are nevertheless based on the legal and governance architecture introduced by the RRF and based on five stages: definition of EU priorities; design of national plans; European assessment of national plans; national implementation of plans; EU monitoring – based on binding EU legal acts (mainly Regulations adopted under the ordinary legislative procedure), structured in a process consisting of well-defined stages. There are differences between the RRF, REPowerEU, the Climate Fund and the Instrument for Ukraine on the one hand, and the new SGP on the other. The former involve the disbursement of EU resources, while the SGP provides for EU surveillance of national budgets. Furthermore, the Commission’s monitoring role is different: under the SGP, rather than suspending payments in the event of non-compliance, the Commission activates the excessive deficit procedure. However, despite these differences, the new SGP shares with all the other programmes mentioned the same structure, based on national plans and performance. It is a new legal framework with its own characteristics that simultaneously strengthen European governance and the role of countries, and it has already become a model that has been replicated in several important initiatives, including the new Stability and Growth Pact.

The innovations introduced in the new Pact and the points of contact between the NGEU and the SGP have an impact on the future prospects for EU economic and institutional policy.

Perhaps the most significant aspect of the RRF is the fact that the EU resources made available to Member States play a lesser role than the central role played by reforms and investments. The name itself, Recovery and Resilience Facility, highlights that this is not (only) a fund but a mechanism (Facility) that certainly provides resources, but also involves decisions on modernisation, commitments and reforms. The same approach is taken by the new governance of the Pact, which looks to the NGEU (for the EU-wide dimension) and the Plans (for the national dimension) as models to strive for. The new Pact abandons the one-size-fits-all approach of the old SGP and introduces specific public debt reduction paths for each individual country, based on multi-annual plans managed with discretion and incentives. The Commission’s position strengthens coordination between the Commission and the Council on the EU side and Member States on the other, and would seem to deprive governments of spending priorities and choices for several years by binding them to pre-agreed Plans at EU level and supranational bodies. However, the Brussels executive already has significant powers of control over budgetary policy anyway; the new legislation is an improvement because it makes governments more accountable and increases their ownership of the plans themselves. This is a model that, in some respects, has “democratic legitimacy” considering that national plans are not derived from supranational diktats or impositions.

Today, both the NGEU and the SGP are fully operational and regulated by the European Semester calendar. The former is coming to an end in December 2026 (including reporting), while the latter is permanently active and forms the cornerstone of EU/Member State relations with regard to budgetary dynamics and the European economy. The significance of the Pact’s impact in the coming years is evident in two developments: first, it is one of the main tasks formally assigned by President Ursula von der Leyen to Valdis Dombrovskis in her letter of appointment as European Commissioner for Economy and Productivity, Implementation and Simplification, specifying that he must ‘ensure policy coherence between the EU and national levels through the European Semester, the revised economic governance framework and the current and future long-term European budget […] the effective and consistent implementation of the reformed budgetary rules under the Stability and Growth Pact’ and, in the context of the reformed EU economic governance framework, “be responsible for the proper integration of the Semester and multilateral budgetary surveillance to improve the coordination of national economic and social policies among Member States and ensure that they address common EU priorities, as well as national and, where relevant, regional challenges”. Secondly, the debate on the possible “extension” of the use of the clauses, a debate that includes positions suggesting additional reasons to justify their activation. Among the most notable is the Commission’s call for Member States to activate the national safeguard clause of the Stability and Growth Pact in order to have additional budgetary leeway to increase defence spending, in compliance with EU budgetary rules. These aspects bear witness to the evolving context in which these new rules operate and the impact that the Pact may have on the management of the European Union’s future economy and policies.

Following the innovation of the NGEU, the reformed SGP appears to be a new step towards a “Hamiltonian moment” for the European Union, influencing the direction of the EU as a more defined institutional entity which, thanks to its “unfinished nature”, allows it to add new instruments, institutions or regulatory frameworks without disrupting the existing ones. With the NGEU and the new SGP, the EU’s ability to respond to challenges and crises by identifying functional and useful solutions and regulations, as has already happened in several sectors, is confirmed, with a significant impact also through the definition of models and standards adopted globally and exerting significant influence in different areas.

Together with the euro, programmes such as Erasmus+ and cohesion policies, NGEU and the SGP have become part of the Union’s “public” DNA, becoming key elements in public policies and concrete actions, making it recognisable on a large scale as a mark of identity involving European and national institutions, whose effects impact citizens, creating a Union that is active in terms of integration, far beyond a simple “union of pacts”.

The widespread adoption of the NGEU model and its inclusion in the new SGP is therefore due to several factors: the increased role of Member States, which are involved in the process but decide independently on the content, implementation and responsibilities of their own plans; and the empowerment of EU institutions, which have the power to guide national policies by deciding on the general objectives that countries plan to achieve. The EU institutions also approve the national plans and, in line with performance-based monitoring, oversee compliance with the timing and disbursement of funds (or the flexibility of EU budgetary rules in the case of the SGP). Finally, the RRF model is linked to the principle of subsidiarity: the EU identifies general objectives and it is the lower levels of government that decide on the implementation tools for achieving the objectives. Finally, the RRF legal technology has a multi-year timeframe, which gives EU institutions a solid and lasting influence on national decision-making in various sectors and for a considerable period of time. This consolidates the approach that sees the NGEU, with its governance, milestones and targets, not as a temporary measure but as a model that is also established in the new EU economic rules based on medium-term structural plans. The requirement to access resources after planning clear, achievable interventions with a guaranteed impact, and that there be a disbursement of resources for the NGEU or no penalties on budgets for the SGP, subject to the achievement of measurable objectives and with monitoring procedures already in place and within a known deadline, is a mechanism that imposes a new discipline that relies not on reporting, but on accountability (of Member States to the Union), and this in itself represents a significant innovation with an underlying “sharing” that obliges all stakeholders to work to ensure that everything functions properly.

The impact on European law has already manifested itself in the terms outlined above in various initiatives undertaken by the EU in different areas and sectors. Initiatives in which the Recovery and Resilience Facility (RRF) has served as a basic model, the example of fiscal rules being the most significant evidence of this.

 

Giacomo D’Arrigo holds a Ph.D. in Political and Legal Sciences and a thesis in European Union Law from the University of Messina. He provides consultancy services on the programming and management of European funds and teaches master’s programs at various universities.

He was Director General of the Erasmus+ National Agency for Youth of the Presidency of the Council of Ministers and founded and chaired ANCI Giovane. He was a member of the ANCI National Presidency Office. He has served as an adjunct professor at the University of Messina. His latest book, “NGEU and the Italian PNRR: Analysis, Governance, and Policies for Recovery” with Piero David, was published in 2022.