EU recovery plan fails to deliver cities’ investment needs

The Covid-19 pandemic may be over, but its impact continues to be felt across Europe. The pandemic caused untold damage, particularly in urban areas, affecting jobs, businesses and local economies.

Responding to this unprecedented crisis, in 2020 the European Commission announced the historic NextGenerationEU recovery plan, with around €720 billion provided through its main funding instrument, the Recovery and Resilience Facility (RRF). Not since WWII had Europe put such a razor-sharp focus on stimulating recovery.

Not only does the recovery plan provide the means to support Europe’s short term economic growth, it also offers a once in a life time opportunity to accelerate Europe’s just, green and digital transformation and put it on the path to climate neutrality.

Since the launch of the recovery plan, Europe’s cities have stated that this transformation can only be achieved if they are closely involved in the implementation of its funds. With 75% of people living in cities, it is local leaders who have the expertise needed to implement the vast majority of the measures required to achieve the EU’s goals.

Now, as the EU prepares for its mid-term review of NextGenerationEU, this much heralded recovery plan finds itself in the spotlight once again. Has it delivered on its promise as a ground-breaking initiative that can bring an end to EU austerity? And can it be considered a model for the future, supporting public investments at local level for the challenges of transition and territorial cohesion?

Lacking long-term public investment

Unfortunately, the evidence outlined in a new report co-developed by Eurocities – Urban Recovery Watch: Empowering Cities in the EU Green and Digital Transition – suggests that the plan’s Recovery and Resilience Facility (RRF) is not solid enough to drive the urban actions required for a just, green and digital transformation and reverse the effects of austerity.

Compiled by Eurocities and the Global Cities Programme at CIDOB (Barcelona Centre for International Affairs), the report says that while the EU recovery plan is a key tool, it was never intended to be the solution to years of underinvestment in public services at local level.

“Long-term investments are still scarce, and a recovery tool that promotes short-term investments to absorb the shock of Covid cannot be resilient and sustainable in the future,” says the report’s co-editor Pietro Reviglio, Policy Advisor for Eurocities.

“The lack of a long-term perspective to public investment, including the need for capacity to deliver investments, is contributing to some of the implementation challenges of the Recovery and Resilience Facility.”

The report provides a comprehensive analysis of the National Recovery and Resilience Plans (NRRP) in nine European countries: the Czech Republic (Czechia), Finland, France, Germany, Hungary, Italy, Poland, Slovakia and Spain.

It presents in-depth case studies evaluating how cities in these countries are implementing the NextGenerationEU plan, including how the funding has been invested and the governance mechanisms used to structure the work between the national and local level.

As noted by the Eurocities Pulse Mayors Survey 2023, EU funding is considered essential support for cities by mayors, but they are increasingly concerned about how the EU can promote public investments at city level.

Ahead of the upcoming mid-term review of the RRF, the report aims to enhance understanding of how the instrument can better harness the capacity of cities to support the recovery process. It also provides recommendations on how the instrument should evolve if it is to become a benchmark for public investment support schemes at EU level.

Centralisation and poor consideration for cities’ needs

The Urban Recovery Watch report confirms previous findings that suggest cities have not been sufficiently involved in the implementation of the NextGenerationEU plan. “Cities have long called for a structured dialogue with the European Commission to explicitly monitor the status of the EU recovery plan in cities,” says Ricardo Martinez, Senior Research Fellow at CIDOB, who also co-edited the report.

“Although the Commission has not taken this request into consideration, cities have continued to advance the assessment of the urban dimension of the recovery to feed into the debate around the mid-term review of the instrument.”

The report finds that in most cases, the design, delivery and governance of the country’s plans were centralised at national level, with a lack of consideration for the specific needs of cities and local governments and the role they could play. Most plans have focused on distributing the resources through competitive calls rather than empowering territories based on their needs and potential.

However, despite many ongoing governance and bureaucratic challenges, such as limited timescales, a lack of consultation with cities and the generic distribution of funds, when cities did receive funding they delivered urban transitions focused on climate action and digital change.

The report warns that the European institutions and Member States are praising NextGenerationEU as an efficient means of distributing resources and subsidies at the EU, while building the case for making it an alternative to other models such as cohesion funds, which are historically built on partnership with territories.

However, Eurocities and CIDOB bring compelling evidence demonstrating that the mechanism does not work for territories’ long-term needs, not least due to its limited scope and budget. “As a result, it cannot be viewed as an alternative to the EU Cohesion policy, which is built on partnerships with territories, and it will not be able to solve the problems of finances and public investments at the local level,” says Pietro Reviglio.

In advance of the plan’s mid-term review, the report calls for the stronger involvement of cities in the implementation of future public investment schemes, as well as recommending direct access for cities to RRF funding. It makes it clear that the bureaucracy and red tape related to urban investments must be removed through reforms at national level, and it urges coordination between NextGenerationEU national plans and Cohesion policy programming.

Added to this, the report says that not all resources available under the RRF have been taken up by EU Member States, with many loans still available. It calls for a pragmatic approach that allows national governments to directly entrust city governments that have ready-made projects to support their urban transformation.

Bologna’s vision: Recovery and resilience

One of the positive case studies highlighted in the report focuses on the National Recovery and Resilience Plan (NRRP) in Italy and the implementation of its funds in the city of Bologna. Italy has the most extensive recovery plan in Europe at €191 billion. This offers the country a unique opportunity to recover from the socio-economic effects of the pandemic.

The implementation of the national plan relies heavily on the role of local authorities, as the primary recipients of funding. According to available figures, municipalities are the implementing bodies for more than 53% of projects and 47% of resources.

This situation makes it a great opportunity but also a considerable trap for cities of all sizes, which have very different capacities available to cope with the plan’s rules, timing and objectives. As a result, many local authorities have been overwhelmed and intimidated by the plan.

A scene of city life in Bologna. Photo by Bianca Ackermann

However, one Italian city that has dealt effectively with these challenges is Bologna. The city has a strong tradition of metropolitan vision, governance and spatial planning, which means it has been able to interpret the plan as an opportunity. As a metropolitan city and municipal government, Bologna will receive around €1 billion, a sum only matched by the funding for Rome. The projects selected by the city government were not just a response to the impact of Covid-19 but reflected the city’s long term vision for growth.

The three most significant projects relate to the city’s historic mission for sustainable development. The first project contributes to building the new green infrastructure that supports the goal of becoming a carbon-neutral city, the second invests in the regeneration of urban areas, and the third deals with constructing two new tramway lines, which are part of the sustainable metropolitan mobility strategy.

“The Bologna case study shows that despite its exceptional nature, the NRRP can be a lever for the capacity of cities to work towards recovery and resilience in a sound, strategic and integrated perspective,” says the case study’s author, Professor Valeria Fedeli, from the Department of Architecture and Urban Studies in the Politecnico di Milano.

The impact of Italy’s national plan on cities is presented in Bologna

Despite the many positives in the Bologna case, the city does face political challenges at national level. A new report from the National Centre for Urban Policies Studies, which was launched in Bologna, has provided an analysis of the Next Generation EU national plan in Italy and its impact on the country’s small and large cities.

The report explains that the urban implementation of the national plan is an “indispensable opportunity for Italy.” However, it says that changes recently imposed by the Italian government have raised doubts about the plan’s next steps. Urban regeneration in Bologna and other metropolitan generally run by opposition parties has been weakened by the shift of huge resources from funding public investments to financing businesses.

According to the report, over €10 billion in investments currently being used by local municipalities have been excluded from the national plan. Unfortunately, the instrument does not provide safeguards to local authorities, and the central government can unilaterally decide on the use of these EU investments.

“These ongoing discussions with the national government are not helping us in moving forward with the programming and implementation of the plan,” says Matteo Lepore, Mayor of Bologna. “The EU has provided an unprecedented number of resources to Italy, and we must work together with all national actors to ensure the success of the plan and pay tribute to the trust given to us by our European partners.”

Visegrad 4 Cities: A lost opportunity?

Another case study highlighted in the report focuses on the Visegrad Group (V4) countries, the Czech Republic (Czechia), Hungary, Poland and Slovakia. These countries are at different stages of the process. All four countries have had their National Recovery and Resilience Plan (NRRP) approved by the European Council, although the Czech Republic and Slovakia are front runners in the RRF process.

In the report, the case study on these countries makes it clear that the input of their cities has largely been overlooked. “The case of the V4 capital cities clearly shows the difficulties in the planning and implementation of the RRF because of highly centralistic national governments,” says author of this case study, Iván Tosics, Managing Director of the Metropolitan Research Institute. “This is true of all four countries, but it is especially clear in the case of Poland and Hungary.

“In these countries, the national decision makers have systematically sought to exclude the larger cities from the opportunities offered by the RRF, for clear political reasons. The big projects proposed by the large cities were not considered; almost all funding is allocated based on open calls, where it is easy to give priority to other clients.”

A street in the city of Brno

In the Czech Republic (Czechia), there were huge expectations at first, as the amount of the RRF funding was said to be €7 billion. However, despite some initial promise cities say they have not been properly consulted by the government. In the end, the national plan was highly centralised and did not take the views of territorial partners into account.

When it comes to accessing national funding, the city of Brno hopes that some brownfield or cultural and creative projects will get funding. The biggest project that has received support so far is the development of the city’s flood protection infrastructure. Supporting affordable housing could also be a project, but the report says the national plan seems to be a lost opportunity.

An aerial view of Budapest

In Hungary, the national plan was not consultative in any way, as no stakeholder proposals or opinions were taken into consideration during the preparation of the final draft. The final national plan, which was fundamentally different from the original plan, was not even published prior to submission to the European Commission.

Budapest had clear proposals and a very precise and tangible list of projects, mostly related to transport decarbonisation, energy efficiency and renewables. This was communicated to the government many times, without real feedback.

“In Hungary and Poland, representatives of large cities deliver a blunt assessment: the RRF is a disaster,” adds Iván Tosics.

The Spanish recovery strategy: An urban paradox 

In the report, the case study covering Spain’s recovery plan is outlined as one built upon an urban paradox. Some of the main priorities addressed in the €163 billion strategy developed by the Spanish government are linked to local competences and urban challenges. Yet local governments have not been invited to take part in the design of the plan or its monitoring and evaluation. Despite its urban dimension, they are just beneficiaries of a budget that is largely centralised.

Most of the funds allocated to local governments have been channelled through programmes designed by the central government and managed through competitive calls for proposals published both by ministries and autonomous communities.

View of Barcelona ©Mohammad-Ali-Niksejel

In the case of Barcelona, its city council has devised a plan involving a range of stakeholders aimed at unlocking the full potential of the recovery funds in the city, and addressing local green, digital, and social transformations.

But while the Barcelona plan was adopted much earlier than the Spanish recovery strategy, Barcelona City Council was not formally engaged with the design of the reforms and investments in the national plan. The council has also experienced bureaucratic issues around funding regulations, including new measures taken to prevent fraud and procedures to make public procurement more flexible.

Despite these difficulties, the overall funding future for Barcelona and other cities in Spain looks positive.

“Approaching the mid-term implementation of the Spanish recovery strategy, the available funds are meant to reduce progressively. However, an addendum recently approved by the European Commission proposes to increase non-refundable funds for Spain by more than €10 billion,” says author of the Spanish case study Agustí Fernández de Losada, Senior Research Fellow and Director, for the Global Cities Programme at CIDOB.

“This, together with the funds still to be disbursed, provides a favourable scenario for cities to continue monitoring and participating in the calls and other funding schemes that will be opened in the coming months.”


Download a copy of the report ‘Urban Recovery Watch: Empowering Cities in the EU Green and Digital Transition’.

This report is the latest step in a multi-year project being carried out by Eurocities, CIDOB and Barcelona City Council. The project seeks to promote the localisation of Next Generation EU, distilling key learnings that can amplify the role of cities in the EU recovery process and twin transitions, and, more broadly, bring the urban perspective into the debate on the future of EU funding instruments.

The Urban Recovery Watch report builds on the project’s first report, published by CIDOB in 2022Cities in the EU Recovery Process: Localising the Next Generation EU – which mapped the degree of participation of local governments in the design of several National Recovery and Resilience Plans across Europe. Building on this pioneering report, the Urban Recovery Watch report offers a second, more comprehensive analysis.

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