The research comes as EU members gear up for a major battle in 2022 over new debt rules. In Germany, debt has risen less sharply and is expected to be just above 70pc of GDP this year.
The debt piles of Europe’s biggest economies have soared during the pandemic, limiting their ability to increase investment.ĭebt in Greece has soared above 200pc of GDP, and has jumped above 150pc in Italy and 120pc in Spain. The paper added: “The mantra accompanying the deployment of the Next Generation EU funds is that Europe needs a huge increase in public investment to succeed in the green and digital revolution.” Mathias Dolls, co-author of the study, said: “This suggests that the EU funds are mainly used to replace national spending that governments would have made anyway.” Belgium has the highest proportion of new investments of the countries studied at 77pc, with Italy on 64pc. However, the research found “no significant relationship” between the amount handed out in grants and a boost in public investment. The €723.8bn is split between grants and loan and was intended to spark huge green and digital investments to help modernise the EU economy.
The Recovery Fund was a landmark step towards closer fiscal ties on the Continent, issuing significant amounts of shared debt for the first time despite major resistance from frugal northern members. Just a fifth of the funding in Germany and Austria is being used for new projects, while the share is 40pc in Spain, according to EconPol Europe, a collaboration of research institutes and universities. The bulk of grants allocated under the Recovery Fund are funding investments already on the drawing board in many European countries as governments attempt to shore up their post-pandemic public finances, new research indicates. The EU’s flagship recovery stimulus scheme is misfiring, as Germany and Spain use its €725bn to pay for existing projects rather than new investment to drive the bloc’s post-pandemic economic revival.
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