Hungary, Bulgaria and Poland are trailing the rest of the EU in drawing on the bloc's post-pandemic recovery fund as it enters its final phase, with Romania, Slovakia and Czechia close behind, environmental watchdog CEE Bankwatch Network said.

September 30 was the non-extendable deadline for member states to file their last payment requests under the Recovery and Resilience Facility (RRF), the €577bn core of the NextGenerationEU programme launched in 2021. Reforms and investments had to be finished by the end of August, the European Commission can pay out until December 31, and anything left unclaimed then returns to the EU budget.

All 27 member states got their final requests in, Hungary the last of them on October 1, Agence Europe reported. By September 30 the Commission had disbursed €272.5bn in grants and €167.5bn in loans, and 10 countries had scaled down their plans, handing back €74bn of the €291bn originally available in loans.

For Central and Southeast Europe the race to the line has been uneven. CEE Bankwatch, a Prague-based network that has tracked the fund since its launch, says the scramble to meet deadlines has raised concerns about last-minute spending decisions, watered-down reforms and the quality of the investments being made. Despite record levels of EU support, tangible results remain limited in some regions, feeding public scepticism about EU spending and the green transition, it said.

"The Recovery and Resilience Facility was an unprecedented experiment in EU financing. It introduced a new 'performance-based' approach that linked payments to the delivery of reforms and milestones. But the pressure to agree on and deliver targets often left little time for meaningful public participation and stakeholder engagement, with implications not only for democratic ownership, but also for the quality, speed and effectiveness of investments," said Bogdan-Alexandru Chelariu, who leads Bankwatch's work on energy transformation.

Grants lost over unfinished reforms

Romania filed its final request on September 30 for €6.04bn, or €4.35bn after pre-financing is deducted, made up of €2.58bn in grants and €1.77bn in loans and covering 104 milestones and targets, Romania Insider reported.

Bucharest has already cut its envelope to just over €20bn, including €13.6bn of grants, from an initial €29.2bn, and acting Prime Minister Ilie Bolojan's government expects to forfeit 6.3% of the grants, ministers told a press conference on September 1. €770mn was tied to the failure to pass a public-sector Wage Law, and up to €100mn to the decision to keep several coal-fired power plants running, a reversal of Romania's decarbonisation commitments. In August an independent monitoring platform supported by Save Romania Union (USR) put more than €2.5bn at risk in its worst-case scenario.

The money has also become entangled in politics. The European Parliament's EPP and Renew Europe groups asked Commission President Ursula von der Leyen to make the €770mn tranche conditional on the rule of law, citing a contested amendment to Romania's Integrity Law.

Hungary went from frozen out to fully in within a single summer. Prime Minister Peter Magyar's new government reached a political deal with Brussels at the end of May on a roadmap to unlock €16.4bn, and Transport and Investment Minister David Vitezy said on August 31 that all 27 "supermilestones" had been met, after more than 100 pieces of legislation were pushed through in three months.

Its final request, for €10bn split between €6.5bn in grants and €3.5bn in loans, was the last to reach the Commission. Budapest has meanwhile signed grant agreements to put €1.37bn of RRF money into grid upgrades and smart meters, and the Commission has proposed lifting the 2022 rule-of-law measures that froze €4.2bn of cohesion funds.

Cash injection

For Bulgaria the funds are a fiscal lifeline. Prime Minister Rumen Radev said on September 2 that recovery money was crucial with state coffers depleted: the government is targeting a 5.7% of GDP deficit this year and the EU opened an excessive deficit procedure in July. Sofia received about €1bn in August only after renegotiating conditions on its fifth payment, including dropping a planned water-meter fee.

Other countries crossed the line with room to spare. Croatia, where recovery funds are worth about 13% of annual GDP, second only to Greece's 16%, submitted a final €2.7bn request after receiving €7.3bn, and Lithuania says it has met all 197 milestones and targets in its final €992.8mn claim. Slovenia's parliament added €320mn of RRF-financed spending to a supplementary budget on October 1 because the money must be spent by the end of the year rather than in 2027.

The deadline has also produced the kind of projects Bankwatch warns about. In Croatia, Rimac Group's robotaxi venture Verne, which took €89.7mn in RRF advance funding, offered to repay the money if it is found not to have met its obligations, after declaring the project complete on August 30.

The pressure will not ease when the RRF closes. Cohesion funds, the EU's main regional development money for the rest of the decade, are also slow to reach the economy, Bankwatch said. Large shares are still awaiting allocation across many member states. Slovakia had drawn only 21.4% of its €12.79bn 2021-27 cohesion allocation by the end of August. With the RRF gone, those funds will have to carry support for households in energy poverty until national social climate plans linked to the EU's new emissions trading system for buildings and road transport (ETS2) are running, and several member states have yet to transpose those rules.

The next seven-year EU budget, the Multiannual Financial Framework, is now being negotiated, and the Commission wants to tie more spending to performance in the way the RRF did. Bankwatch, which has catalogued more than 150 beneficial and harmful investments across EU funding instruments, called for stronger safeguards, monitoring and public participation built in.

"The Facility should be seen not only as a recovery instrument, but also as a source of lessons for designing a more accountable, participatory and effective EU budget," said Anelia Stefanova, who runs Bankwatch's campaign on recovery and cohesion funds.