EU initiative for energy independence from Russia to be integrated into all countries’ recovery plans by the end of the year
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Bulgaria is inexorably approaching the moment when it will have to admit that it will probably not be able to take advantage of all the grants that the EU has allocated to it under its recovery program from the COVID-19 pandemic.
From an indecisive but still average performer, Bulgaria fell into the group of countries with an “increasing risk of delay” according to the European Commission’s latest annual report on the implementation of the Recovery and Resilience Mechanism, published on 19 September.
“The government’s high level of instability has led to delays in key legislative reforms, such as those on public procurement, anti-corruption and the accountability of the Attorney General. The lack of political stability and administrative capacity has also led to delays in the implementation of several important energy and transport investments and to calling into question key aspects of the plan related to the decarbonisation of the energy sector”, is the conclusion of the European Commission.
The report also said that while the government plans to ask for a second payment in the fall of 2023, it is unclear whether this will be possible or, if it does happen, whether it will be in full. The reason for such doubt is a “significant risk” that several milestones and targets related to key reforms will not be met on time.
“It is still unclear when the work can be finalized due to the political situation,” the report said.
Last at the start
Bulgaria remained the only European country that has not yet submitted its revised plans for reforms and investments – a mandatory condition for continued participation in the program.
How a planned change to the Recovery Plan presents itself as political courage
Even the punished Poland and Hungary, which did not receive a single cent due to unfulfilled preconditions for access to European funding, have submitted corrected programs to the European Commission since the summer and are awaiting approval.
Once eager to receive €5.7 billion in free EU aid over five years through the Recovery and Resilience Mechanism, through which Brussels has earmarked a total of €800 billion to shake off the effects of the COVID-19 crisis, Bulgaria has gone so far as to make the topic of recovery disappeared from public debate.
The second payment
Delays in the implementation of projects and reforms, as well as in procedural obligations to ensure continued access to European money, increase the likelihood of an administrative reduction of funds and the impossibility of fulfilling its stated intentions until the end of the initiative at the end of 2026.
Bulgaria has already missed one planned payment of around 724 million euros of European funds in the first quarter of 2023 due to unfulfilled conditions. 22 promised laws, which were supposed to be adopted by January, are still being prepared and discussed by the National Assembly, despite the declared belief of the government of Nikolay Denkov that the European Commission will transfer the money.
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And the laws are a third of the total of 66 projects and reforms that are agreed in the plan as a condition for access to the second amount. There is no public information on the progress of the other measures.
In June, after meetings in Brussels, the prime minister assured that the backlog would be caught up by the end of September, i.e. until the end of this week, in order to submit to the European Commission the request for the allocation of the money, which is already included in the 2023 budget.
According to the procedural rules, after the request is made, the Commission has two months to assess the fulfillment of the prerequisites, and the member states – another month to approve the allocation of the amount.
But unenacted laws are not the only problem facing the plan created by the parliament. In January, a previous composition of the National Assembly asked the government to change its commitments for a 40 percent reduction in carbon emissions by 2025. According to the parliamentary parties, which are the same in the current composition with few exceptions, this will ensure that coal plants do not to be closed in the next 13 years.
Even when the decision was adopted, the then Deputy Prime Minister for European funds Atanas Pekanov warned several times that the European Commission would not allow such a significant change in the plan, one of whose main goals is the green transition.
Bulgaria needs to modify its recovery plan to fit its new budget and REPowerEU, but the most difficult part of the negotiations are the changes demanded by the National Assembly to save the coal plants
Months later, this was also recognized by Prime Minister Nikolay Denkov, who at the end of June pointed to the lack of a clear idea of how to combine the Green Transition Commission’s requirements with care for people and development as the main reason for the serious lag behind the Recovery Plan of the economy in the coal regions.
After meetings in Brussels, Denkov announced that the government is working on an analysis that will be coordinated with Brussels, while simultaneously preparing the documentation for amending the recovery plan.
Denkov accused the cabinet of inaction on the adjustments in the Plan related to coal
Minister Vasilev, who took responsibility for the Recovery Plan, reassured that the energy commitments do not affect the second payment and it is not threatened by the lack of agreement on the request of the National Assembly. However, it affects the submission of the revised plan, the deadline for which is the end of September.
The lack of a strategy for the coal regions and the green transition in the plan does not exhaust the problems facing its implementation, as Bulgaria must correct it and at the same time supplement it according to the European regulation that governs it.
On the one hand, the government must agree with Brussels which projects and reforms from the original plan it will not be able to implement due to the reduction of the budget of the plan by 578 million euros (due to the better than expected performance of the Bulgarian economy during the pandemic).
The Cabinet decided to drop some of the projects under the recovery plan
On the other hand, a new chapter should be added to the plan with energy reforms and projects under the EU plan to overcome the shocks in the world energy market caused by the Russian invasion of Ukraine (REPowerEU). According to it, Bulgaria can add about half a billion euros to the Recovery Plan for projects related to energy efficiency and diversification of energy sources.
The EU will strengthen the recovery plans with another 20 billion euros
When it clarifies its intentions with the Commission, Bulgaria will be able to submit a proposal to correct the Recovery Plan. Which it will have to evaluate within two months before handing it over to member states for final approval.
And while the three issues are related, they show the complexity of the negotiations that are taking place with the European Commission outside the public debate.
It was only on September 26 that Deputy Prime Minister Vassilev announced at a meeting with the American Chamber of Commerce that Bulgaria would submit a request for a second payment in the first week of October together with a report on the implemented reforms necessary for it. He gave no information on when the revised Recovery and Resilience Plan will be submitted.
Where are the others
So far, the European Commission has received 25 proposed adjustments to recovery plans. 20 countries have added energy projects. The European Commission has approved the revised plans of Germany, France, Estonia, Slovakia, Finland, Luxembourg, Italy, Malta and Ireland. The member countries have finally said “yes” to five of them, which included the additional chapter – Estonia, France, Italy, Malta and Slovakia.
How Slovakia managed to save its recovery plan from cash cuts
In two and a half years, 21 countries (including Bulgaria) have requested a total of 34 payments, 25 of which have already been made for a total of 154 billion euros (1.37 billion for Bulgaria in December 2022). Two countries – Poland and Hungary – did not receive a single euro, as payments for them are tied to the fulfillment of preconditions to guarantee the independence of the judiciary and the protection of the EU’s financial interests.
Since the payments are related to the implementation of pre-agreed projects and reforms, they are indicative of progress in the implementation of the plans:
Four countries – Greece, Croatia, Spain and Italy – have made three requests for payment each, France, Poland, Portugal, Slovenia and Slovakia – two each.
Spain is the only European country that has already received three payments from the European Commission, for €37.04 billion – 48% of its total due until 2026.
Failure to do so costs money
Even if in the next two days it manages to fit into the previously announced deadline and request a second payment from the European Commission, Bulgaria has no guarantees that it will come by the end of the year and will be in full.
Romania provides an example of this after submitting a request for a second payment to the European Commission in June, claiming that it has met 49 commitments and 2 targets. However, the Commission considered that two key promises related to investments in the energy sector were not satisfactorily achieved and triggered the “suspension of payments” procedure. At the end of September, Romania had not yet received the partial payment for the achieved targets.
A similar fate befell Lithuania, where two tax-related commitments were found to be in default and it received only partial payment.