Recovery and Resilience Fund: assessment and lessons for EU’s next financial framework

The EU is generally perceived as lacking the necessary flexibility to adapt to rapidly changing conditions in a timely manner, due to its complex political system and lengthy decision‑making processes.

Its response to the pandemic crisis was an exception, as the EU acted promptly, establishing the Recovery and Resilience Fund (RRF), which introduced a number of innovations: (a) a large part of the aid consisted mainly of grants, in contrast to the previously established practice of loans, (b) it was financed, for the first time, by joint EU borrowing, and (c) the assessment criteria were the implementation of agreed national action plans and progress in the digital and energy transformation, rather than fiscal adjustment policies (austerity).

The programme of the Republic of Cyprus included short‑term measures to address the rising unemployment at the time, support for businesses that were at risk of bankruptcy, strengthening the health system and safeguarding a timely supply of vaccines to fight the pandemic, as well as long‑term measures to promote the digital and energy transition.

Although the initial response to the RRF by analysts was mixed, the recent assessment presented at a workshop of the European Commission’s directorate‑general for economy was favourable. Both the internal evaluation and the independent evaluation by experts and research centres concluded that the RRF reversed the negative climate of confidence prevailing following the pandemic, which was reflected in a steep reduction of interest rates for sovereign borrowing and an acceleration in the growth rate, even in vulnerable economies. At the same time, it supported the promotion of structural changes, while leading to a significant increase in investments, particularly in the less developed countries of the south, such as Greece and Italy. In Cyprus, the absorption of RRF funds reached approximately 70 per cent by the end of 2025, a percentage considered satisfactory.

National governments and citizens viewed the national reform programmes positively, in contrast to the adjustment programmes of the 2010-2015 period, which created intense political and social opposition, despite the improvements achieved in macroeconomic indicators. The RRF, and its contribution to the shifting of the discussion from ‘austerity’ to ‘prosperity’, appears to have contributed to partially restoring citizens’ trust in the ability of Europe to respond effectively to crises.

Furthermore, and despite initial reservations, the extensive state intervention in the context of the implementation of the national recovery and resilience programmes does not appear to have led to distortions in the smooth functioning of markets. Approval processes for appropriations were accelerated compared to established practices, although room for further reducing administrative burden and streamlining procedures was identified. Overall, the positive experiences from the implementation of the RRF are leading to corresponding adjustments in the formulation of the Multiannual Financial Framework for the period 2028-2034, which is a key priority of the Cyprus presidency of the EU Council.

One of the challenges created by the RRF is the burden on the budget of the European Commission, at a time when spending needs in the areas of artificial intelligence, energy transition and security are increasing, which is expected to be a thorny issue in the context of the forthcoming negotiations for the Multiannual 2028–2034 EU budget.

The independent internal and external evaluation of the RRF is a best practice, and the relevant reports are available on the websites of the independent evaluators, allowing interested parties to refer to further analysis and data. Such an exercise would be useful to carry out in Cyprus as well.

In addition, the experience gained from the RRF has sparked a broader discussion on the future architecture of EU economic governance. Several member states argue that the success of the RRF demonstrates the value of coordinated investment policies during periods of crisis and transition.

Others highlight that the RRF has helped reduce economic divergence within the EU, particularly by directing resources toward countries with historically lower absorption capacity. As Europe prepares for the next decade of geopolitical and technological challenges, the lessons of the RRF are increasingly viewed as a blueprint for designing more agile, investment‑driven policy tools capable of supporting long‑term competitiveness and social cohesion.

Andreas Charalambous and Omiros Pissarides are economists and the views they express are personal