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Recovery and Resilience Plans in CEE: Overview and Implementation

Recovery and Resilience Plans in CEE: Overview and Implementation

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Entering into force on February 19, 2021, the EU Recovery and Resilience Facility aimed, according to the European Commission, “to mitigate the economic and social impact of the coronavirus pandemic and make European economies and societies more sustainable, resilient, and better prepared for the challenges and opportunities of the green and digital transitions.” CEE Legal Matters spoke with lawyers from Bulgaria, Greece, Hungary, Latvia, Poland, and Romania to learn what each country focused on, with its Recovery and Resilience Plan (RRP), and what difficulties lie ahead, now that these plans have been submitted to the EC.

A World of Promise

Broadly speaking, the potential impacts of the National RRPs cannot be overstated – for example, Nagy & Trocsanyi Partner Peter Berethalmi says “the nine areas of the plan will fundamentally contribute to ensuring the future social and economic well-being of Hungary.” Penteris Partner Daniel Klementewicz also believes that the RRP “would massively contribute to the country’s economy.”

National RRPs identify the priorities and aim to implement measures related to achieving specific goals in each country. Their key pillars are the green transition, digital transition, and economic and social resilience.

Green Transition

One of the common pillars included by the Bulgarian, Greek, Hungarian, Latvian, Polish, and Romanian RRPs is related to the green transition. In several countries, it is related to both promoting renewable energy production and investing in green transport solutions.

Tuca Zbarcea & Asociatii Partner Levana Zigmund highlights that Romania’s RRP allocates 41% of the funds for the green transition, with investments in sectors such as modernizing railway infrastructure, providing infrastructure for green and secure urban transport, deployment of renewables, and the renovation of buildings to reduce carbon dioxide emissions.

According to Lextal Partner Janis Esenvalds, the Latvian plan includes creating a multimodal public transport network, “investing in clean transport infrastructure, including railways, trams, electric buses, and cycle lanes, […] financing a large-scale renovation initiative to increase the energy efficiency of residential buildings, public buildings, and businesses,” as well as investments “in the green and digital transformation of electricity grids.”

The Hungarian RRP, according to Berethalmi, aims “to decarbonize and digitalize the energy sector” and, specifically, “to increase the flexibility of the electricity system and promote the integration of weather-dependent renewable electricity production, introduce energy efficiency measures, and promote residential renewable energy investment.”

Regarding the Greek green transition pillar, Drakopoulos Partner Michalis Kosmopoulos says “the plan’s investments include an extensive energy class upgrade program” as well as “the energy interconnection of the Greek islands.”

Schoenherr Attorney-at-Law Elena Todorova explains that the war in Ukraine led to the amendment of “the originally foreseen combined-cycle power plants and infrastructure for hydrogen and natural gas transmission,” because of sanctions against Russia – Bulgaria’s main gas supplier. On the other hand, she says, “the creation of battery storage facilities, the deployment of smart grids for energy system operators, and the exploration and development of geothermal energy sources are envisaged.”

Digital Transition

Another major pillar included in all six RRPs is the one related to digital transformation. According to Zigmund, “21% of the total funds are allocated for digital transition” in Romania, with projects related to the digitalization of public administration, the health sector, and education.

According to Esenvalds, key measures to advance Latvia’s digital transition include “supporting businesses in introducing digital technologies, supporting the introduction of e-commerce solutions, innovation, and new products.” Improving basic and advanced digital skills “with the aim of increasing the share of people with at least basic digital skills to 54% in 2025,” is also a priority, as is the “deployment of 5G corridor infrastructure along the Via Baltica highway, to promote connected automated driving, sustainable mobility, and improve road safety through innovation.”

Kosmopoulos says that, for the Greek digital transition pillar, “the plan envisages pre-installation of fiber optic infrastructure in buildings, emphasis on AI and remote working, and will provide approximately 600,000 school pupils and students in low-income families with vouchers for the purchase of tablets and laptops.”

Social and Economic Cohesion

While all six RRPs include a social and economic cohesion pillar, the content of each seems to vary. With a primary focus on healthcare, education, and employment, the RRPs also have some country-specific characteristics.

Esenvalds reports that measures to reinforce Latvia’s economic and social resilience include modernizing healthcare by “investing in hospitals and healthcare service providers, to strengthen the resilience of the health sector.” Berethalmi says the Hungarian RRP aims “to build a modern, efficient healthcare system, strengthen primary healthcare, and increase doctors’ and healthcare workers’ salaries.” In Bulgaria, according to Todorova, the main measures in that regard include the “modernization of emergency medical care, aiming at effective and sustainable disaster and emergency management […], the creation of a digital platform for medical diagnostics, the establishment of centers for cerebrovascular diseases, as well as the prevention of socially significant diseases.” Healthcare-related measures are also included in the Polish, Greek, and Romanian plans.

Looking at education and employment, Berethalmi highlights that the Hungarian RRP has a focus on “demography and public education,” as well as creating a “highly educated, competitive workforce.” According to him, “the key to social and economic sustainability is education.” In Greece, “the social pillar program aims to increase employment with particular emphasis on and development of digital skills and creating employment positions,” according to Kosmopoulos. And, focusing on employment directly, according to Esenvalds, Latvia’s plan also includes a minimum income reform, “strengthening the basic social safety net through setting the minimum income level (including for pensions) at 20% of median income and introducing annual positive indexation, to adjust for changes in the cost of living.”

Transport Connectivity

In terms of infrastructure, the Romanian RRP targets reducing “territorial disparities at regional, intra-regional, and intra-county levels,” Zigmund reports. “A total of 434 kilometers of new highways, most of them located in underdeveloped areas, will be financed from the RRP funds.”

In contrast, Todorova highlights that the transport program in Bulgaria is strongly linked to the modernization of the country’s rail transport. “It includes the construction of an intermodal rail terminal in Northern Bulgaria, close to one of the Danube port terminals, and the completion of stage three of the Sofia Metro network,” she says.

Public Administration and Private Investment

In Latvia, Greece, Romania, and Hungary, the RRPs also specifically address the improvement and modernization of public administration. In Latvia, according to Esenvalds, it includes “centralizing administrative support functions and investing in the training of staff in public administration.”

Additionally, in Greece, a significant amount of the grant is allocated to the “private investment pillar,” Kosmopoulos reports, with the program including “major infrastructure projects and investments in culture, tourism, and the health system.”

Great on Paper

While these pillars and their promises sound great, not all are convinced they are enough. Esenvalds, for example, believes that the amount of the RRP grant is quite modest, saying “things will improve a little, but not dramatically.” According to him, the RRP’s main weakness is its fragmented character. “The two major priorities that are set for Europe,” he explains, which will be “particularly important for the future” are the green course and digitalization. He says “Latvia has targeted only the minimum requirements on these counts and has invested heavily in various other activities.”

Those would be good problems to have in Poland and Hungary, which have yet to receive their RRP green light. “Poland, together with Hungary, has a unique position with regard to the RRP, as the procedure is on hold,” Klementewicz notes. “Our plan was submitted to the EC last year. However, approval of funding is strongly linked to the democracy and rule of law issues in the country. Therefore, while we have our priorities on paper, the plan is still to be approved.”

Ultimately, all believe that implementation is key. For some, that requires a focus on building up capabilities with Zigmund saying that “a major challenge for the Romanian government is implementing a series of reforms in the public sector, to increase its capacity to develop or assess projects, monitor implementation, and attract available EU funds,” and with Klementewicz suggesting that “it is also crucial to cooperate with the business community.”

Several countries are concerned with the timeframes at play. Zigmund points out that, taking into consideration the short period of time allocated for the implementation of the plan, “the Romanian authorities must urgently adopt a series of legislative measures in order to accelerate the approval procedures for projects to be funded from the RRP.” Berethalmi too noted that the implementation of the RRP by Hungary might be challenging but added that “the Hungarian Government has already issued the Government Decree,” to set out “the legal framework of allocation of the RRP and implementation of the required measures.”

Still others raise concerns over potential corruption in rolling out these programs with Kosmopoulos believing that, while the plan is challenging, it includes “control systems that will protect against serious irregularities such as fraud, corruption, and double funding.” This is echoed by Esenvalds who puts it simply: “procurement procedures must be followed so that the state does not run into any obstacles.”

Should the above be kept in mind, the lawyers we spoke with were positive about the potential impact of the RRPs, with Kosmopoulos concluding that – with the necessary resources and national policies in place – “we can be reasonably optimistic that Greece 2.0 will contribute decisively to the achievement of sustainable and dynamic growth and the promotion of prosperity for all Greek citizens.”

This Article was originally published in Issue 9.4 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.