The accounts do not come out. The European Commission and the Italian government agreed on Monday night to extend by another month the deadline for the institutions to assess whether Rome has truly met all the reforms, investments and milestones required for the approval of the third disbursement of Next Generation funds. The 19,000 million are thus 'frozen' a few more weeks, showing the frictions between both capitals and opening the door for the first time a country receives a partial and not complete payment.
These funds do not function like cohesion or structural funds. Each country submitted in 2021 a National Recovery Plan with dozens of milestones and commitments divided into different stages, each associated with a disbursement. When the State believes that it has closed all the details, it makes a request, the Commission evaluates it, the Economic and Financial Committee supervises it and if everything is fine, a transfer is made. Italy is the country that has the most money allocated, followed by Spain. Ours is the one that is most advanced in the process, since it has already received the green light for the third payment, which awaits any day of these weeks. Rome goes right after, having submitted the third application. But when it comes to looking at concrete progress, problems have come.
The Italian media have been warning for weeks that there were problems, but they have interpreted this extension as part of the negotiation, without exaggeration. The first requests were made by the government of Mario Draghi, but the third, in December, was made by Giorgia Meloni. She says it is the fault and responsibility of her predecessors, who drafted the roadmap, and the EU institutions believe she was hasty in submitting the application.
"Following the meetings of Minister Raffaele Fitto with the European Commissioner for the Economy, Paolo Gentiloni, and with the EU Commission's Recovery Plan working group, it was agreed to extend the evaluation phase by one month to allow the Commission services to complete the technical verification activities, continuing the fruitful discussion that has already made it possible to positively evaluate most of the objectives set for 31 of the December 2022," reads the statement sent last night by Meloni. "The Commission has agreed to extend this phase taking into account the number and complexity of the 55 milestones and targets envisaged. The Commission also highlighted its recognition for all the actions undertaken by the Government, which have already made it possible to certify significant progress towards the positive achievement of almost all the objectives set on that date."
The problems are of two types. On the one hand, the absorption capacity. Italy cannot cope and cannot manage more than 200,000 million euros so quickly, just as Spain is having enormous problems to channel the 140,000 allocated, including loans and not only transfers. The Meloni government has understood this and is one of those that is pushing the most for the EU to change the planned design, which involves absorbing all funds by 2026 in practice, and allow the deadline to be taken to 2029 at least.
The latter are of a different nature: the reforms are not made and there are many frictions. It is not a single or small element, it is not an audit system that is not yet operational, as happened with our country. The European Commission has said Italy has failed to comply on four or five important points, such as port concessions, which Brussels is demanding have a stricter limitation on their duration. Secondly, heating and netting. Thirdly, subsidies for stadiums in Florence and Venice. But in addition, there are also concrete complaints about the Italian system of beach concessions, which in the country are mostly privately controlled, about some competitive practices in national legislation and several cybersecurity projects. Not even mentioning that Rome refuses to ratify the ESM Treaty, the mechanism created a decade ago to rescue countries and to which the Union wants to give more functions. Element that are not included in the Recovery Plan, but that weighs in the negotiations.
The regulation of these recovery and resilience plans, negotiated two years ago, stipulates that when a country makes an application, a very short sale is opened for evaluation (although in this third Italian payment, as in the Spanish, it was decided to extend it an additional month already beforehand because it coincided with the Christmas holidays). This brevity is logical because in reality the execution of the same goes hand in hand with Brussels and the technicians are perfectly aware, almost in time, of each step. What the Commission evaluates, however, are the concrete decisions, the laws passed and not the drafts discussed. And there they believe that Rome has not been ambitious enough or has not fulfilled what it promised.
These are 'minor' things, not structural reforms such as a pension system or a tax system, but important. Although the system has been in place for more than a year and a half, there was one element that remained to be defined until very recently: what exactly to do with countries that, having submitted a request for disbursement, have not completed all the required milestones or reforms. Most do, but not all. From day one it was very clear that there was the possibility of partial disbursements. That should be an exceptionality, but it was an option in very particular cases, for which a little more time or parliamentary consensus was necessary, for example. Last month, finally, Brussels presented the methodology on how to act in that case, how to penalize in those partial disbursements and how to weigh the reforms and investments contemplated, because it was always very clear that they cannot all be worth the same.
If in the next month Brussels considers that the milestones have not been met and a partial disbursement must be made, weighing all reforms and investments, an extra period of six months would be opened to complete what is missing. After that semester, the pending is evaluated again and if all goes well the pending payment would be unblocked, but if it is found again that the reform has not been completed, that money would be lost definitively. A small part in relative terms of the total, and more if the loans are added, but much more than symbolic.
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