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

THE UNEVEN IMPACT OF THE PANDEMIC. PROSPECTS FOR A CONVERGENT AND RESILIENT RECOVERY OF THE EU? 85 countries such as Italy or Spain, hit harder by the crisis and with weaker fiscal positions. They prioritised liquidity measures, such as guarantees, since they had a lesser budgetary impact (ECB, 2021). In Germany, the direct as- sistance was available from the first moment for almost all sizes of company, while in countries such as Spain they were not introduced until 2021, when it was estab- lished that the prolongation of the crisis was leading to an unsustainable situation in many firms, particularly SMEs. In short, the assistance on the part of the community partners has been very different in size and scope, par- ticularly as far as state assistance is concerned, and espe- cially to companies, which poses a risk to the functioning of the single market and the competitive balances within the European Union. All that places the Member States in very different post-pandemic positions to address the process of recovery that should not only be about re- storing the economies and society to the situation prior to COVID-19, but also doing so at a pace and in such a manner as to avert a greater deepening of the differences among the community partners. A plan for recovery: NextGenerationEU To foster the recovery the European Council of July 2020 reached a historic agreement to put together an econo- mic recovery plan on a European scale, known as Next Generation EU (NGEU). The plan is a milestone in Euro- pean construction and confirms, once again, that crises act as a catalyst for the EU to grow and take a leap forward in its process of integration. The plan is the most important community econom- ic policy instrument of recent decades, shaping a new framework of governance structured via different pro- grammes and mechanisms whose purpose is to promote investments and reforms in the Member States to tackle a dual goal: First, and immediately, to secure econom- ic recovery after the crisis, and in the medium term to promote and consolidate the structural reforms required to achieve sustainable, inclusive, and resilient growth in the long term and underpin a resistant, carbon neutral, and digitally advanced economy, in line with the United Nations’ Sustainable Development Goals. It is a novel European spending instrument, both in the amount of funds it makes available (750 billion euros) and in its orchestration via grants and not just through loans, as well as in its governance in line with the Multian- nual Financial Framework 2021-2027 and the European Semester. In fact, the Recovery and Resilience Plan is in- tegrated into the EU’s long-term budget and comes in addition to the 1.1 trillion from the Multiannual Financial Framework 2021-2027, resulting in a total of 1.84 trillion euros to boost Europe’s recovery and resilience. As far as its funding is concerned, it provides for the issuance of purely European debt on the part of the European Commission, which would make it one of the world’s chief supranational issuers. However, and above all, this issuance is the first step towards a European safe asset and while it is exceptional and temporary now in the medium term it could become permanent and be a funda- mental instrument for boosting the process of European integration and making progress in banking union with a deeper and more diversified European financial market. The Recovery and Resilience Facility (RRF) is the main tool for deploying the NGEU as it gathers the bulk of the resources, 672.5 billion euros (312.5 billion in grants and 360 billion in loans) to be allocated to investments – chiefly green and digital projects, which must account for 37% and 20%, respectively, of the total resources – and structural reforms that strengthen the economies of the Member States and make them more resilient with a view to the future. In fact, the design of the NGEU is based on the Com- mission’s strategic priorities – European Green Deal, dig- ital transition, strengthening the single market, and a fair and inclusive recovery –, though the spotlight has fallen on the two transitions, green and digital, which are key vectors for channelling the investments of the Member States and steering public spending and investment to- wards a new model of growth in the medium term. It is the opportunity for Europe to lead the double, green and