THE STATE OF THE EUROPEAN UNION REPORT. Europe in a period of transition

THE STATE OF THE EUROPEAN UNION 76 vels in all socioeconomic indicators. On the other hand, new problematic social situations exist in some Member States, which are increasing inequality within and also between Member States. In order to act directly against the health risk ari- sing from pandemics, the EU reinforced the idea of a European Health Union with its €5.1 billion EU4Health programme. It is intended to facilitate preparedness and prevention and strengthen the resilience of health sys- tems in the event of cross-border health risks. This is particularly important for those Member States whose health systems are underfunded. Health expenditure varies very widely in the EU, both in terms of GDP and health spending per capita, and a significant gap has emerged between western European states that invest a lot in health and central European states that invest less. EU4Health came into effect in April 2021 and will be implemented in annual work programmes. In addition to disease prevention, the digitalisation of the health sector, the development of medicinal products and me- dical devices and the Member States’ coordination and management of vaccine reserves, for example, there will be other items on the agenda where the EU failed to deliver in the early stages of the COVID-19 crisis. In June 2021, the Commission also presented its proposals for a strategic framework for health and safety in the work- place, which it had revised in light of the pandemic. The framework now includes improved preparedness and emergency measures for health risks. The NextGenerationEU package, agreed between the heads of state and government in July 2020, was a groundbreaking response to the economic damage cau- sed by the pandemic. For the first time, a temporary €750 billion recovery instrument, designed to supplement the Multiannual Financial Framework, will disburse €390 billion in grants and €360 billion in loans to support the economy. The borrowing necessary to fund this instru- ment is accepted jointly by the community of states and does not have to be repaid until 2058, probably with the help of a new EU tax, the details of which still need to be agreed. The lion’s share of the money (€672.5 billion) will be provided via the recently established Recovery and Resilience Facility. The financial assistance will be allocated using a distribution key, which in addition to considering economic performance and population size will also factor in the different socioeconomic starting po- sitions prevailing at the outbreak of the crisis (unemplo- yment between 2015 and 2019) for grants in 2021 and 2022 and will also take on board the effects of the crisis (decline in real GDP in 2020, overall decline in real GDP in 2020/2021) for grants in 2023. Once the European Parliament and the Council finally agreed the package in February 2021, the Member States submitted reco- very and resilience plans to the European Commission in which they outlined concrete funding projects for public investment up to 2026. The Commission will evaluate the plans and the Council will approve them, based on criteria that link the economic aid with the EU’s medium- term structural objectives.Accordingly, the national plans should allocate at least 37 percent of expenditure to investments and reforms that support climate protection goals and at least 20 percent to the digital transition. In addition, the objectives of economic cohesion, producti- vity and competitiveness; social and territorial cohesion; health, economic, social and institutional resilience; and the focus on young people all play an important role. The Member States are also called upon to take on board the country-specific recommendations from the 2019 and 2020 European Semester cycles. Payment of the first instalments is expected in the second half of 2021. An additional €47.5 billion will be made available for cohesion funds, which are included as the second- largest component of the NextGenerationEU package in the Recovery Assistance for Cohesion and the Territories of Europe (REACT) and made available through the Eu- ropean Social Fund Plus (ESF+), the European Regional Development Fund (ERDF) and the Fund for European Aid to the Most Deprived (FEAD). The focus on the economic and social situation of the Member States and on the way in which they were (negatively) impacted before and during the pandemic constitutes a new approach, which, despite the tempo-