A flexible “covid strategy” should be implemented for at least the next two years, Dimitris Skalkos, General Secretary at the Ministry of Development & Investments, tells Athens Digest. “It is important to redefine the balance between the EU objectives and the current regional imbalances. This presupposes a serious reassessment of the management and implementation framework of Cohesion Policy programmes in order to simplify procedures and limit requirements,” he adds. Skalkos is in charge of the planning and implementation procedures of projects funded by the EU structural and cohesion funds. He is also one of the five members of the unofficial Greek RRF task force, established last summer to coordinate drafting of the Greek National Plan for the Recovery and Resilience Facility. A EUR 16bn of grants have been allocated to Greece.
Interview with John Papageorgiou
In the coming weeks, Greece is expected to submit its RRF national plan. What is the state of play regarding discussions with the EU and in which areas do issues remain open?
Indeed, the National Recovery Plan of our country is in the final stage of its planning and according to the schedule, it will be submitted for approval in mid-April. It has undoubtedly helped a lot that we started drafting the plan last summer. It is fully supervised by the Prime Minister himself and it is a priority for the government. To date, about 90% of the project has been completed. Some issues remain open, such as the financial management of the RRF loans as well as a number of mostly technical issues, which in turn are addressed in the context of our excellent cooperation with the European Commission. And of course, the plan must also be approved by the cabinet members before its submission.
Based on current data, to what extent do you expect a growth boost as a result of the recovery funds, starting from this year and up to 2026? Is the yearly target of 3.5% of GDP achievable given that 2020 closed with a recession of 8.2% of GDP?
The evolution of the pandemic is the unknown key parameter and every macroeconomic forecast at this point has an inherent degree of uncertainty. The impact of RRF funds (the expected disbursement of 13% in advance) as well as other annual EU funding has been incorporated into the draft national budget. And the growth projection is 4.8% of GDP. The 3.5% you rightly mention is the Commission estimate, but it does not take into account the impact of the RRF. But any assessment is still premature. In the coming months and based on the developments related with the pandemic and the opening of the economy, we will be able to make safer forecasts. I should also note that the 2020 recession was ultimately smaller than originally estimated. The effective management of the pandemic in our country (the lockdown but also the evolving vaccination program) advocates in favor of the optimistic scenario that is expected to confirm the initial prediction. Beyond that, the calculation of the macroeconomic impact on GDP, employment and a number of other indicators based on the Commission flagships are being prepared this period as a required accompanying RRP document.
Apart from the milestones related to the implementation of the projects, reform- targets should also be met for the approval of the RRF disbursements. Is there a plan to effectively and without delay monitor this under the current EU monitoring framework?
Monitoring the implementation of the Recovery Fund projects is crucial for the proper implementation of the national Recovery Plan. At the management level, the new Agency for the coordination and the implementation of the national Recovery Plan has already been established, staffed and started operating at the Ministry of Finance. At the same time, we are providing the Agency with all the necessary systems and tools for project management and monitoring (Process Management and Control System, Integrated Information System, etc.).
But allow me to add one more element that supports the country’s ability to implement RRF projects in a timely manner. This is our overall positive experience through the years in managing EU projects and programs in Greece. And we must refer to the current performance of our country regarding the absorption of the EU structural and cohesion funds as we are in 6th place among the 28 national programs. Finally, in recent months we have proceeded in a series of institutional changes, many of which will positively affect the implementation of projects in our country, such as the new law on public procurement.
Finally, as far as the milestones of investment plans and reform actions are concerned, they will be clear and specific after the approval of the national plans.
Greece intends to mobilize significant private funds through the loans of the RRF. To what extent is this possible and what kind of private investments do you expect to be mobilized?
Based on the distribution of the RRF funds, Greece can mobilize loans totaling about 13 billion euros. Loans will follow the priorities of the National Recovery Plan, i.e. the financing of projects that contribute to the transformation of the economy, and are part of the strategic pillars of digitization, green growth, extroversion, R&D and business scaling up. International financial institutions, commercial banks and the Hellenic Development Bank, which has now been fully activated, will be involved in the management of the loans. Loans will be directed to both SMEs and large enterprises, while it is also important to support high-growth firms.
Unavoidably the most mature projects will be funded through the RRF. Where does this leave the national planning for the EU structural funds? What kind of projects are expected to be included in those programmes?
The Recovery and Resilience Facility has time constraints. By 2026 its funded projects must be completed. Therefore, the National Recovery Plan will include mature projects or in any case projects that are fully feasible to be completed until the end of 2025. However, this does not mean that cohesion policy programs will provide resources to immature or less important projects; nor, of course, is there a prioritization of the Recovery Fund over cohesion policy. In fact, both financial instruments are seen by us as the two key components of our national development strategy. As you may know, the government has adopted and follows a significant part of the National Plan for the Development of the Greek Economy submitted by Pissaridis’ Committee. Based on its priorities, both the RRF projects and the actions of the cohesion policy programmes will be proposed. Besides, in order to cover the significant investment gap of the Greek economy, resources of both of these funds will be required, as well as their maximum possible leverage with private resources. Therefore, complementarity and synergies between them, also explicitly required by RRF Regulation, are prerequisites for their effective implementation. During this period we work in parallel with the RRF and the plans of the new co-financed programs for the period 2021-2027, aiming to ensure the complementarity but also to a clear separation of the actions of the two Funds where this is possible and useful.
Regarding the planning of the new EU Structural and Investment Funds with a total budget of 26.7 billion euros, we expect to have the completed by the fall of 2021. And so far, we on schedule. The projects / actions that we are intending to finance from the EU funds will focus on facing the structural backwardness of the Greek economy. They will follow the Commission’s Recommendations for Greece and of course the National Development Plan. In particular, our goals include:
– support of the smart and innovative transformation of the economy, including upgrading research, transition to Industry 4.0, “green” transformation of enterprises, synergies of small and medium enterprises (clusters) and corporate in-house training
– green investments and energy savings (by promoting renewable energy, circular economy, biodiversity protection, sustainable water resources management)
– smart, “clean” and multimodal transportation (roads, port infrastructure, rail)
– support of employment (training, active labour market policies), strengthening of the public health system, upgrading education, social inclusion of vulnerable population groups, ‘child guarantee’ actions, policies against social exclusion and extreme poverty.
Here, as in the RRF, targets and milestones are set for the projects to be financed. And there are also time constraints on resources’ commitment and de-commitment.
Due to the pandemic, the European Union has provided flexibility for the allocation of structural and cohesion funds. Do you think that flexibility should be maintained for the 2021-2027 period and if so, what kind of flexibility would Athens ask from Brussels?
Indeed, during the pandemic, the European Union’s response was immediate and decisive, helping to support European economies. I briefly mention the Coronavirus Response Investment Initiative and the Coronavirus Response Investment Initiative Plus (CRII and CRII +) under which we implemented four schemes (repayable advances, subsidies for loans’ interest, business guarantees, special purpose allowances). I must also mention the temporary framework for state aid and the new ReactEU tool for ESI funds 2014-2020. All of our actions against the economic impact of the pandemic have helped curb the deep recession and increase unemployment compared to other economies as shown by a number of studies.
Especially in the European Structural and Investment Funds- ESIF, the flexibility in the regulatory framework allowed the mobilization of significant resources (app. 6.5 billion euros) to the maximum extent possible, without canceling pre-covid19 project planning. The actions we planned and implemented were mainly aimed at strengthening business liquidity, supporting employees and shielding public health. And according to the official data of the EU Commission, Greece was in the first places of the performance in the mobilization of resources against the pandemic.
In the specific circumstances of the pandemic, Cohesion Policy responded effectively to its role by providing important funding tools and resources in order not to deviate further in terms of convergence from the more developed European regions. At the same time, the successful operation of ESIF in the pandemic leaves an important legacy for the direction we must move in the coming years. First, since the recovery of national economies after the end of the pandemic will not be automatic, it will require the implementation of a ‘covid strategy’ for at least the next two years, as well as maintaining a minimum of flexibility in co-financed programs such as the current one. Secondly, it is important to redefine the balance between the targets of cohesion policy strategies and the ability of European regions to adapt their programs to their specific needs and circumstances (or, to put it in other words, between the EU objectives and the current regional imbalances). This presupposes a serious reassessment of the management and implementation framework of Cohesion Policy programs in order to simplify procedures and limit requirements that have significantly increased in the last two programme periods.
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