“Very Tight Control”

As an EU program, the Recovery and Resilience Facility (RRF) is unprecedented in size and scope. Already prior its adoption, there was concern among some Member States about the Commission’s willingness and capacity to manage it properly. The Dutch Prime Minister Rutte explained to his Parliament how (quoted in Bokhorst)

If we in the Netherlands cannot immediately have full trust in the Brussels system not saying ‘well, the reform hasn’t really happened, but here’s your money anyway’, then we need something in the governance to ensure the Netherlands has very tight control over the process.

Much due to the determined efforts by Prime Minister Rutte and the “frugal” countries, the July 2020 European Council finally agreed to task the Economic and Financial Committee (EFC), to oversee disbursements from the RRF. If no consensus is found in the EFC, then the matter can be further escalated to the European Council.

Proper control by Member States over what ultimately is their taxpayers’ money that will be needed to pay back the NGEU debt seems like a relevant matter from the viewpoint of good governance and democratic control. As often is the case in investigations into the internal workings of the EU, information turned out to be rather hard to come by.

The EFC is an EU body set up by Article 134 TFEU. It consists of representatives of the Member States, the Commission, and the ECB. The EFC has a secretariat which, according to the EFC website, presently employs 27 officials. The same secretariat also serves the Eurogroup, the Eurogroup Working Group, and a number of EFC subcommittees. Given its size, and the wide range of tasks of which the RRF is just one, it is safe to say that this is an organisation geared to keeping the procedural wheels rolling, rather than one with independent analytical capacity. It certainly does not have the practical capacity to access primary data or uncover information to challenge the Commission assessment under the RRF.

Under the EFC Statute, the EFC decides by a majority of the members if a vote is requested. Its proceedings “shall be confidential”. Consequently, there is little public information available on the EFC. Yet, following my recent access to documents request, slightly more information is now available about its role in the RRF process. These documents demonstrate that the peer scrutiny is, in general, light, conducted under tight deadlines and entirely dependent on information and preliminary assessments provided by the Commission. The picture that emerges is that the scale and complexity of the task is so overwhelming that the EFC is able to provide little more than a rubber stamp to confirm and legitimise Commission judgment.

How the EFC works – a quest for information

The national plans and disbursements are prepared in confidential discussions between the national government and Commission officials. It is known that the material exchanging hands in those talks is voluminous, but the Commission routinely refuses most requests for documents and / or strategically delays their consideration. The plans are broadly worded and focus on political objectives. Most of the documents only exist in national languages. For example, Portugal’s 346 page Recovery and Resilience Plan (RRP) is only available in Portuguese. The Commission working document assessing its substance in 109 pages is also available in English, with a three-page summary. As regards the linguistic regime, the Ombudsman has spoken for a need to “publish the machine translations of the national plans, with appropriate disclaimers, so that this essential information can be the subject of pan-European scrutiny”. So far this has not happened.

The national plans and their supporting documentation, interesting as they may be from the public communication viewpoint, are of limited formal relevance. From the legal viewpoint, what matters is what is included in the Council implementing decision through which the EU gives the plan its seal of approval. The annex to the Council implementing decision contains descriptions of the targets and milestones against which a Member State’s performance is assessed before money changes hands. These descriptions are brief and typically provide only a very general impression of what exactly the Member State is expected to do. For Tony Murphy, the President of the European Court of Auditors, some objectives “are vague in nature, resulting in diverging opinions as to whether an objective has actually been achieved or not.”

Just to take a random example from the Portuguese implementing decision, Measure RE-C05-i05-RAA consists of

Finalisation of works on new (to replace obsolete structures) or requalified structures responsible for animal slaughter, certification of milk quality and food safety, to respond to the evolution and growing demands of the markets, incorporating investments in the innovation of production and organisation processes, in the green transition, the digital transition and animal welfare.

To actually comprehend the task assigned, let alone properly assess whether it has been completed in a manner that fulfils the substantive goals, would not only require access to supporting documentation on what has been agreed and delivered, but also a fairly detailed contextual understanding of the current state and challenges of animal husbandry and food safety in Portugal which is likely to exceed the competence of the senior finance ministry officials forming the EFC.

The time window of four weeks for the EFC to work on a disbursement starts with the Commission issuing its positive preliminary opinion on a payment request submitted by a Member State and ends with the Commission implementing decision to effect the payment. Based on the information available on the Commission RRF website, the process is usually conducted a bit faster. For example, for the first Spanish payment request and Italy’s fourth payment request it was roughly three weeks. While this may appear reasonably generous, anyone with practical experience from EU decision making knows that, given the procedural requirements and the technical complexities involved, it is a blistering pace.

What particularly caught my attention was Portugal’s third and fourth payment request. The Commission’s positive preliminary assessment is dated on 13 December 2023, and the relevant Commission implementing decision (authorising several billion of non-repayable support to Portugal) on 22 December 2023, leaving only nine days (or seven, counting only workdays) for the Member States to familiarise themselves with the material, the EFC to organise a meeting, prepare and approve an opinion and the Commission to set up a meeting of a comitology committee needed for formal adoption. One has to ask, within these timelines, at what point did the EFC actually conduct its careful analysis. So I started to dig a little deeper and search for any documents that would shed light on these questions.

Under the EFC Statute the secretariat of the EFC is assured by Commission services. EFC documents are thus Commission documents. From the viewpoint of transparency, this is bad news. Given the development of its access to documents practices during the current Commission, there is simply little point in filing a request – which of course is exactly what the Commission aims to achieve. Instead, I approached the Council with my request, as the documents would certainly be also in its possession.

It appeared that, to guide its handling of RRF-related matters, the EFC has approved three documents. Access to them was, however, refused with reference to how they “contain sensitive information about the conduct of the work in the EFC (and also the Economic Policy Committee (EPC)) – including on ongoing files – release of which would severely affect the decision-making processes in the EFC and the EPC and also in the Commission and the Council […], in especially delicate areas of interest to the financial and economic policy of the European Union and its Member States.”

On appeal, I pointed out how this brief justification failed to meet the requirements of Article 15 TFEU, Regulation No 1049/2001 and relevant jurisprudence, in not engaging in a substantive examination of the potential risk and examining the existence of a public interest. It is difficult to see how procedural matters could be confidential.

On appeal, the Council unanimously agreed: it consulted again “Commission services which have in turn consulted EFC services”. Full disclosure had suddenly become possible. In a statement annexed to the decision, France, however, expresses “its concern about the request for access to EFC documents and calls for a discussion to be held as soon as possible within the EFC group on the issue of transparency of EFC documents”.

While I am grateful for having eventually been granted access, the route to this outcome reveals something about the way in which the Council approaches access to documents requests. The general policy seems to be a blank refusal in the initial round, accompanied by a brief, cookie-cutter justification. Only if the applicant persists and submits a confirmatory application, something resembling a “carefully scrutiny of the the content of the documents” actually takes place and access may be granted. In this case, the decision may also have something to do with the fact that the same applicant had just won another access to documents case in the General Court against the Council for a few weeks earlier.

The ”imperative of a swift implementation”

The guidelines were worth the trouble of requesting, as they do draw quite an informative picture. The Commission has two months for its own assessment. Obviously, the submission of a payment request has been preceded by continuous contacts between Commission officials and the Member State representatives, so the Commission has a relatively full picture of the situation already when the clock starts ticking.

The EFC, in contrast, has not been part of the preliminary discussions leading up to the payment request, so the time window genuinely starts from zero. It is difficult to know whether it has access to any other information than the summary documentation provided to it by the Commission in the form of its positive preliminary assessment. Even if it did, I doubt that anyone would have the time to read it.

The EFC meetings on RRF matters are prepared by the Economic Policy Committee (EPC). The EPC was set up in 1974 to promote coordination of Member States’ short and medium-term economic policies and provide advice to the Commission and the Council. Under its Statute, it supports the EFC; and consists of two members appointed by the Member States, the Commission and the ECB. Unless decided otherwise, the proceedings of the Committee are confidential.

According to an EFC note dated August 2021, the meeting of the EPC “should be organised as soon as possible after the Commission provision of its findings, but not earlier than five working days after the Commission has provided to the EFC its findings related to its positive preliminary assessment. The EPC should have sufficient time to prepare each EFC opinion, possibly about 1.5 hours discussion for each opinion”. With a presentation by the Commission and an intervention by the Member State concerned, this does not leave much time for a grand tour de table.

It seems that it is actually the EPC, a coordination forum for Member States set up in the mid-1970s, that does the heavy lifting. An EFC note of December 2023 explains how the EPC prepares the draft opinions as it allows for detailed “discussions and multilateral scrutiny over the achievement of milestones and targets and the Commission’s preliminary assessments”. According to another EFC note dated May 2023, after the initial meeting, all but one draft opinions have been finalized in the EPC via a written procedure. Following this, EFC has endorsed the opinions without changes in the text. The sole exception mentioned concerns a the payment suspension for Lithuania which, according to the the Commission 92-page assessment, had failed to provide information about two of the relevant milestones.

The EFC documents paint a picture of peer scrutiny that remains at a general level, is conducted under tight deadlines, and is strongly limited by scarce resources. They also reveal an evolution of the process to a point what looks much like a mere formality. In the August 2021 document, the EFC underlines how the purpose of its opinion is “to contribute to the effective implementation of the Recovery and Resilience Facility, by providing a (consensual – to the extent possible) view of Member States” “on whether the relevant milestones and targets have been fulfilled in a satisfactory manner (therefore, agreeing or disagreeing with the Commission positive preliminary assessment that satisfactory progress has been achieved)”. As to its format, the opinion “should be standardised but flexible enough”; it should

give an overall view, and it does not need to present the EFC position on each relevant milestone and target. It should briefly summarise the discussions of the EFC and EPC, which should strive to reach consensus. Opinions are expected to have 1-1.5 pages per payment request, dependent on the discussion.

A page and a half is not much, and certainly not enough to accommodate more than the most bird-eye view of the fulfilment of the measures.

The August 2021 note underlines the reliance of both the EPC and the EFC on the information made available by the Commission:

The EFC opinion will rely on the available information on the fulfilment of the relevant milestones and targets. Neither the EFC nor the EPC will have the capacity to produce a separate assessment of the fulfilment of milestones and targets. The Regulation on the Facility provides that the Commission shall provide to the EFC its findings related to its positive preliminary assessment. The Commission preliminary assessment will therefore be the main basis for the EFC and EPC discussions and the subsequent EFC opinion.

Minutes from an EFC meeting annexed to the Note reflect concerns about the heavy workload arising from the implementation of the RRF and emphasises the “imperative of a swift implementation in spite of the additional workload, including the importance of avoiding, as far as possible, duplications in the disbursement phase as well as in the approval phase of the plans”. Apart from the procedural efficiency, the swiftness of the process may also reflect the limited capacity and resources available to actually engage in any kind of substantive scrutiny.

For disbursements seen as uncontroversial, the EFC procedure has gradually been downscaled. The documents paint a picture of procedures being gradually accommodated to the pragmatic realities described above. Today, the EFC approval can take place in a simplified (written) procedure, “if and only if the following criteria are met”:

‐ There is an agreement of the EPC on the text and no square brackets are left open;

‐ No member in the EPC discussion has asked for a discussion in the EFC;

‐ The payment request is not subject to a possible payment suspension;

‐ And the positive preliminary assessment is not on milestones and targets previously

assessed as not achieved (in a payment suspension).

However, the standard procedure needs to be used in case the disbursement entails an audit‐and‐control‐related milestone.

The third payment request of Portugal that initially provoked my interest seems to be an “exceptional deviation to the agreed process”, identified in the Note of December 2023. The EFC President had concluded on 18 December 2023 that the “precise modalities for exceptions would be discussed and formalised”. This was seen to raise questions about the need to “preserve the integrity of the process, fair and equal treatment among members, sufficient time for scrutiny and credibility of the multilateral surveillance”. Deviations would be allowed only in “exceptional and objective circumstances”. Such a process could be granted at when a country sends “in writing to the EFC a request for an exceptional acceleration and provides the necessary justification”, within one working day of the Commission’s preliminary assessment. The procedural question of a possible deviation should preferably be decided by consensus; yet “sufficient time is preserved for Member States to properly scrutinise the preliminary assessment according to their national practices”.

Peer scrutiny or mutual congratulations

The way RRF peer scrutiny is arranged is fundamentally curious. On the one hand, the reason the EFC was originally tasked, by the European Council, to examine each disbursement was the lack of trust, by some leaders, in the Commission’s ability or willingness to hold Member States to sufficiently high standards in their delivery of the required reforms and investments. On the other hand, the picture that emerges from the EFC documentation is that the Commission was left in total control of all RRF-related information. The EFC opinion relies primarily on the Commission’s assessment, and one would think that the Commission is smart enough not to reveal information that could be used to challenge its own position. All the while, the pressure is on to accelerate the rate of disbursements that the mid-term review found lagging behind schedule.

Even if they had access to primary information, the EFC and the Member States would in any case lack the practical capacity to properly assess the enormous scope of issues covered by the 27 national plans and the thousands of milestones and targets therein. Hence, although the time frame in which the EFC is expected to deliver its opinions is objectively tight, it is unlikely that a lengthier process would lead to different outcomes, either in the expedited case of Portugal or in the cases following normal timelines.

Finally, apart from the ability to properly scrutinise each other’s performance, Member States also lack the inclination. There is very little to be gained by giving another Member State a hard time, while the diplomatic cost might be very real. It is easy to understand why each country prefers to concentrate on its own milestones and targets to legitimate its own share of funding, rather than worry about the thousands of milestones included in other Member States’ plans.

Peer scrutiny in the Council has, in general, never worked particularly well. When there is no immediate domestic political imperative to do so – as there was for example in the context of the Greek bailout packages – Member States simply do not like to challenge each other and prefer rather to leave it for the Commission to ask any uncomfortable questions. One reflection of this is the application of EU’s economic governance framework, where studies demonstrate how over the years, “[p]eer pressure turned into mutual congratulations“.

The Commission’s implementation of the RRF is also scrutinised by the European Parliament through the Recovery and Resilience Dialogue. While the Commission is only to “take into account any elements arising from the views expressed” in this dialogue, the Parliament has more teeth when it holds the Commission politically accountable for the implementation of the RRF through the budget discharge procedure. While information asymmetries also affect the Parliament, MEPs may have additional channels of information and, in case of MEPs that belong to opposition parties, also a political motivation to challenge Commission findings.

The RRF is a model that the Commission carefully designed over the years, and which, as Commissioner Gentiloni recently argued, should “serve as a useful blueprint for the future”. If and when such proposals proceed to political discussions, it may be useful to keep in mind that this blueprint means a near-total delegation of decision-making powers to the Commission. For any facility approaching the RRF in terms of scope and complexity, “tight control” of the use of money by Member States is, and will remain, an illusion.