Investigation into the Recovery Fund: Where did €18 billion go, and where will the next €18 Billion be spent?

In December, the government is set to submit a new request—its fifth so far—to the Recovery Fund for a disbursement of €3.3 billion. This request is part of a €36 billion program, equivalent to roughly 20% of Greece’s GDP, making it proportionally the largest in Europe. Greece has so far received €18.2 billion, or 50% of the total budget, ranking fifth in fund absorption, with numerous flagship projects already underway.

The Cadastre stands out among these projects. Since the 1980s, Greece has been struggling—lagging behind nearly all other European countries—to develop a nationwide urban planning system and a comprehensive database of property ownership. The Recovery Fund has financed and continues to finance major infrastructure projects that had become proverbial white elephants: the Thessaloniki Metro, finally delivered after nearly a century of planning; the E65 Highway, spanning mainland Greece; and the Northern Road Axis of Crete, among others.

The launch of free afternoon surgeries, upcoming SMS notifications for 5.5 million Greeks regarding free cardiovascular exams, and initiatives for cancer prevention and treatment are also funded by the Recovery Fund, which will wrap up at the end of 2026. The Greek program encompasses 106 investments and 68 reforms, amounting to €31.16 billion, including €30.5 billion in European funds—comprising €18.43 billion in grants and €12.73 billion in low-interest loans—to mobilize a total of €60 billion in investments over the next five years.

A substantial 86% of the total funds are directed towards public sector entities, especially ministries. The remaining €4 billion has so far been allocated to 41 businesses, primarily through loans but also via grants for energy projects. However, unresolved challenges persist in funding small and medium-sized enterprises (SMEs), as many have yet to improve their banking profiles since the financial crisis.

Programs Set to Launch in 2025

For 2025, some of the major projects funded by the Recovery and Resilience Facility include:

■ “My Home II” Program: This is the second phase of a housing initiative launched in 2022 with EU funds. Starting this December, it features expanded income (eligible individuals can have annual incomes up to €20,000, with a cap of €28,000 per couple) and age criteria (25 to 50 years), aiming to benefit approximately 20,000 recipients. It is funded with €1 billion from the Recovery Fund, matched by an additional €1 billion from banks.

Recipients can secure loans of up to €190,000 for purchasing a first home, with 50% of the loan interest-free and the remainder subject to a low interest rate to be determined through negotiations between the Development Bank and commercial banks. Deputy Minister of National Economy and Finance Nikos Papathanasis estimates that the average interest rate will be below 2%, compared to the current mortgage rate of over 5.5%.

■ Public Sector Digitalization: Recovery Fund resources will put an end to public services requiring citizens to shuttle between offices to obtain and submit documents (“even to prove they were born,” as Digital Governance Minister Dimitris Papastergiou remarked).

By the end of 2025, all public sector records will be digitized at a cost of €550 million, with full interoperability between public services enabled, allowing seamless electronic data exchange upon citizens’ requests—a project costing €80 million.

■ Cadastre: The Prime Minister has set a firm deadline for its completion by the end of 2025, which remains unchanged. The project is now 90% complete and will soon be delivered as a fully functional and modern system covering every corner of the country.

■ Zero-Emission Buses and Electrified Transport: The Recovery Fund is investing €220 million in 250 electric buses (140 for Athens and 110 for Thessaloniki) and subsidies for installing approximately 8,500 chargers nationwide to promote electric vehicle use.

■ Electrical Interconnection Projects: Led by ADMIE, these include connecting the Cycladic islands to the mainland grid via the Corinth-Koumoundourou transmission line, funded with €145 million.

■ Decarbonization and Energy Storage: With €242 million in investments, Western Macedonia and Megalopolis will transition from lignite use, restoring approximately 60,000 hectares of former mining areas for agricultural and tourism purposes and developing solar power and research centers.

An additional €450 million will fund large energy storage systems with a capacity of up to 1,380 MW (pumped storage and batteries).

■ “Exoikonomo” Programs: These energy efficiency initiatives for residential, commercial, and public properties are worth €1.1 billion. By the end of 2025, energy upgrades will be completed for 30,000 urban homes and 9,700 commercial properties, addressing energy poverty through renewable energy sources.

■ Public Health Modernization: Over €800 million will be allocated to upgrade 80 hospitals and 165 health centers nationwide, implement electronic health records, introduce a risk-sharing clawback system, and finance clinical trial expenses.

■ Employment, Skills, and Social Protection: The third pillar of the Recovery Fund emphasizes job creation and training, including programs for 7,000 unemployed individuals aged 25-45, monitoring systems for vocational school graduates, new service centers for vulnerable groups, and an app for streamlining unemployment benefits and other social protections.

The Greek Program

Greece is “counting down the days” until the submission of its fifth request to receive a total of 3.3 billion euros from the Recovery and Resilience Fund. By December, Greece will request the payment of 1.3 billion euros in grants—funds that do not need to be repaid—and 2 billion euros from the loan portion of the Fund.

These funds will be added to the 18 billion euros that Greece has already received from the Recovery Fund, and will serve as a “prelude” to the amounts that will be requested in the next two years: 4.9 billion euros in 2025 and 7 billion euros in 2026.

Greece has requested and secured a total of 36 billion euros (split equally between grants and loans), which will be incorporated into the Greek economy through the National Recovery and Resilience Plan, Greece 2.0. “Greece 2.0” was approved on July 13, 2021, by the Economic and Financial Affairs Council (Ecofin) of the European Union. The plan includes 106 investments and 68 reforms, distributed across four pillars, with a total of 31.16 billion euros, of which 30.5 billion euros are European funds (18.43 billion euros in grants and 12.73 billion euros in loans), aiming to mobilize 60 billion euros in total investments in the country over the next five years.

“Greece 2.0” consists of four pillars: (1) Green, (2) Digital, (3) Employment, skills, and social cohesion (health, education, social protection), (4) Private investments and economic and institutional transformation. For its implementation, Greece is requesting the full amount of resources it can receive within the framework of the Recovery and Resilience Fund.

What has Greece received so far?
To date, four payment requests have been approved for Greece, with the most recent disbursement, amounting to 1 billion euros, being made by the European Commission on October 16 (in late July, an additional 2.3 billion euros were disbursed from the low-interest loan section of the Fund), after the successful completion of the 4th payment request submitted in early June.

Thus, with this payment, Greece has now disbursed 18.2 billion euros from the 36 billion euros total package of grants and loans allocated for the country by the Recovery and Resilience Fund. This amount exceeds 50% of the total budget for the National Plan “Greece 2.0” and the resources it has secured, placing the country in 5th position out of the 27 member states in terms of progress with the Fund, as the other countries, on average, are around 30% in terms of disbursement of secured resources.

The use of the funds received by Greece, as well as the other countries, is monitored by a Special Coordination Service for the Recovery Fund (which is preparing a new task force to track the progress of projects), along with local committees.

Need for a sprint
Greece has already received 50% of the funds it has secured (18.1 billion euros out of the 36 billion euros), but these funds must be converted into public and private investments, a process that needs to “pick up the pace.”

At the same time, a sprint is required to secure the remaining 18 billion euros by the end of 2026, and of course, these must also be converted into investments. The final funding request from Greece is expected to be submitted in August 2026, and all resources must be injected into the economy by the end of 2026. For this to happen, Greece must, in the next two years, along with investments from the ESF, implement Public Investment Programs worth 15 billion euros for each of the two years, meaning public investments totaling 30 billion euros during this period.

In anticipation of the submission of the 5th payment request, Greece is obliged to complete the 29 milestones for the next tranche on time, which include everything from contract awards to specific actions for further digitizing the Public Administration and the Justice system—projects that represent massive undertakings for Greece. A key challenge is that two of the most significant milestones for the period are digitizing 30% of the public records and completing the public posting of 85% of property rights in the Cadastre, both of which are “on track” according to the established timeline.

Distribution of the pie
As expected, the government seems to place much greater emphasis on grants, i.e., the money that Greece will not have to repay, as evidenced by the fact that the country consistently ranks in the top five among the 27 countries that have received Recovery Fund allocations—both in terms of absorption of the Recovery and Resilience Fund and ESF resources. Moreover, this year Greece is setting a record in its public investment program, which totals 13.5 billion euros.

At the same time, the loan portion is also “in motion,” with milestones for the absorption of European funds. These are low-interest loans, which, however, “count” toward the national debt. It is noted that while the provision of loan resources to large enterprises has been relatively easy, it is estimated that integrating small and medium-sized enterprises will be more challenging, as many of them are still “scarred” by the decade-long crisis and some continue to report losses. The lesson from the Greek crisis has made banks particularly cautious and very strict on the conditions and terms for granting loans.

Following the numerous proposals submitted by private enterprises—especially the larger ones—to the four systemic banks, and the pre-approvals they received, more than 800 such investment plans, totaling a budget of 26.5 billion euros, have been posted for funding.

How the Fund Was Created

Even for the most passionate anti-European, the Recovery Fund is a “blessing.” It represents the implementation of a historic decision or a major experiment in how Europe should function. So, what exactly is this Fund and how does it work? The precise name of the European Recovery and Resilience Fund is RRF – Recovery and Resilience Facility. To understand what it truly is, we must go back to its creation.

It was May 2020, and Europe was gradually and stunned emerging from the first wave of the COVID-19 pandemic. After about a month of lockdown across European economies, leaders knew they were facing something unprecedented. The economies of the EU’s trade partners needed to recover quickly, all while managing the exhaustion of their health systems. How could this be done?

With the European Commission already reviewing a recovery roadmap, on the 18th of that month, then-German Chancellor Angela Merkel and French President Emmanuel Macron, in a joint press conference, presented their proposal, which was very different from the almost “punitive” approach they had become accustomed to during the eurozone crisis.

The two leaders pointed toward the mutualization of the fiscal cost of the pandemic and using it as an opportunity to develop the weaker economies. They proposed that the EU borrow half a trillion euros from the markets, which would be incorporated into the seven-year European budget (the MFF, which also provides resources for ESIF), and from there would be converted into direct funding, mainly for the weaker economies of the European Union.

Since this effectively meant a roughly 50% increase in the European budget for 2021-2027 to €1.6 trillion, some EU countries—Austria, the Netherlands, Denmark, Sweden, Finland—strongly resisted. This led to the typical, exhaustive negotiations through the “27” EU summit meetings, until the summit of July 21, 2020.

There, the increase in the seven-year European budget by €750 billion to €2 trillion was approved (through common borrowing from the markets). The difference was that the direct funding provided was about €390 billion, with the remainder of the additional budget (around 50%) offered as loans to the countries requesting them.

To use the additional funds of the European budget for managing the consequences of the pandemic, the Recovery and Resilience Facility (RRF) was created, which we now call the Recovery Fund. Through this mechanism, approximately €340 billion—80% of the direct funding as well as all loans—were allocated to countries using a formula similar to that of the Cohesion Funds, where criteria such as per capita GDP and unemployment rates in each region before the pandemic were used. Of course, in the case of the RRF, the extent to which each economy was impacted by the pandemic in 2020 and 2021 is also taken into account, which is why countries like Italy, despite not being the poorest, have benefited significantly.

And where does this money go? Naturally, it is neither given away nor directed uncontrollably by each country. The goal is for these funds to be used for projects and reforms, and those that are included in the RRF must be related to at least one of the following six thematic pillars: the green transition, digital transformation, “smart, sustainable and inclusive growth,” “social and geographical cohesion,” “health and economic, social and institutional resilience,” and “policies for young people.” At the same time, the Recovery Fund finances private investments, primarily through banks. The scheme involves the participation of the Recovery Fund, banks (with very low-interest loans), and private investors (usually in shares of 50%, 30%, and 20%, respectively).

Each country has submitted a plan, and once it is approved, they proceed with requests for payment installments (every six months) of the amount they are entitled to if they have met the milestones required and agreed upon. Payments to all member states within the Recovery Fund are based on performance and depend on the implementation of the investments and reforms outlined in the Recovery and Resilience Plan. This progress, meaning performance and evaluation, is monitored by the Economic and Financial Committee of the European Council. Based on its opinion, the Commission makes the final decision regarding the disbursement of funds.

Under the European Semester framework, ECOFIN also approves country-specific recommendations and conclusions on the in-depth reviews of the year. Of course, each country has its own distinct plan and goals, which vary according to its needs. For example, while countries are required to dedicate at least 37% of their projects (about one-third of which are reforms) included in the RRF to the “green transition” and the environment, the 22 countries with approved plans have, on average, exceeded this threshold by 40% since the start of the Fund, with some, such as Denmark, exceeding 60%.

Delays

Since the very beginning, European Commission officials had reservations about whether countries would be able to integrate the funds of the Recovery Fund into their real economies. In Greece, which is progressing at the fastest pace among the “27,” there are still concerns about delays in the release of funds into the real economy.

The issue of the different timeframes between commitments, disbursements, and payments is not new for Greece and Southern European countries, as it appears in all development programs. In our case, it is common for funds from European funds to be committed but, due to the flaws and bottlenecks in the Greek system, they often take time to reach the accounts of the beneficiaries.

Thus, while Greece may be ahead in terms of what it has done compared to other European countries, these funds do not reach businesses and other beneficiaries at the same speed. This is also highlighted in a relevant report from the Bank of Greece, which was written when 48% of the total funds had been absorbed, while 23% of the overall milestones had been achieved (the milestones include specific amounts of loan contract signings).

The latest report by the Governor of the Bank of Greece (for the first half of the year) outlined this problem, with Mr. Stournaras stating that “Greece, while being one of the few countries that has received 3 installments (note: this was written before the 4th installment was received), is facing delays in the disbursement of grants to businesses, reflecting the limitations of regional and local authorities regarding administrative processing and the implementation of investment plans.”

According to the report, from June 2022 (first loan agreement) to January 25 of the current year, 271 loan agreements totaling 8 billion euros had been signed, of which 4.5 billion euros were public resources from the Recovery Fund and 3.5 billion euros were loans from banks.

However, of the 4.5 billion euros, only 1.36 billion euros had already been disbursed to businesses. In the report by the Governor of the Bank of Greece, further analyzing the problem, it is emphasized that “the double elections in May and June, as well as the two rounds of regional and local elections, contributed to the delay in the final disbursements of grants. Other reasons recognized by the European Commission, which constitute a common challenge for all countries, involve local and regional authorities responsible for project implementation.”

According to the Bank of Greece’s report, the “Greece 2.0” program, through which the resources of the Recovery Fund are drawn, has included projects for financing via grants amounting to 20.7 billion euros, which corresponds to the entire budget (including VAT). Additionally, by the end of December 2023, 624 applications for financing through loans from the Mechanism, totaling 8.17 billion euros, had been submitted, of which 269 applications have moved forward to the signing of project contracts worth 4.36 billion euros.

However, the disbursements of grants to businesses have been delayed. Specifically, by the end of December 2023, transfers from the state budget to entities within and outside the general government amounted to 5.3 billion euros, of which only 2.4 billion euros had been paid to businesses by the end of September 2023.

The situation is similar with the low-interest loans subsidized by the Recovery Fund. Although the amount of loans for which agreements have been signed has increased significantly, the disbursements to businesses remain relatively low.

What is the current situation based on more updated data? Bank sources note that today approximately 800 investment projects with a total budget of 23 billion euros (of which 10 billion euros are loans from the RRF, 7.3 billion euros are purely bank loans, and the rest is own contribution) have been included in the funding of the Recovery Fund. About 360 loans have been contracted, some of which come from the grants of the Recovery Fund, and 265 loans have been disbursed, with a total budget of 6.3 billion euros, of which 1.7 billion euros come from the Recovery Fund loans (the remaining 1.34 billion euros come from bank loans, and the rest from own contribution).

According to the same sources, approximately 360 financing agreements have been signed so far, with a total budget of about 11 billion euros (of which 4.8 billion euros are financed by the loan component of the Recovery Fund, while 3 billion euros come from bank loans).

Maturation

The government is optimistic, with Deputy Minister of National Economy and Finance, Nikos Papathanasis, noting that “27 countries have received the Fund, with our country being in the top 5 in terms of absorption. Therefore, we are achieving the milestones and the reforms.” He also mentioned that there are goals — with the amounts increasing exponentially — which are being achieved.

For 2023, as Mr. Papathanasis explains, the target was 2 billion euros, and it was achieved, while the target for this year is 3.3 billion euros from the Recovery Fund, just in grants. For the public investment program, the loan component, meaning the resources that will enter the economy from this, is not included. The government’s economic team’s plan was to have absorbed 2.4 billion euros by the end of November, with 900 million euros expected in December.

In 2025 (the program has exponential entry as it matures), the government expects another 4.9 billion euros to enter the economy from the Recovery Fund, and in 2026, the year the Fund expires, the relevant amount will be 7 billion euros. In fact, the European Commission is also calling for an acceleration in the absorption of the Fund’s resources, given its expiration in 2026.

“We must be in line with the requests and disbursements of resources from the European Commission (we are in the top 5), and the next step is for the money to enter the economy. Everything predicted in the Medium-Term Fiscal Structural Plan submitted to Parliament a month ago will be implemented,” said Mr. Papathanasis.

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