Exogenous shocks and proactive resilience in the EU:The case of the Recovery and Resilience Facility

The Covid-19 pandemic prompted economic policy innovations in responseto new exogenous shocks, resulting in economic recovery policies at thenational and supranational level. This paper considers the modalities ofthese policy innovations and their long-lasting effects in the case ofthe European Union (EU), focusing on the Next Generation EU (NGEU)programme and its centrepiece, the Recovery and Resilience Facility(RRF). We discuss the novelties in the design of the NGEU/RRF incomparison to previous EU structural funds, aimed at reducing regionaldivergences across the EU. The NGEU is changing the way the EU financesitself as never before had the European Commission borrowed at suchlarge scale and long maturities on financial markets. In the paper, weidentify potential gaps in the design of the EU Recovery Funds, due totheir focus on thematic clusters with limited linkages to othervertically designed EU programmes, an absence of microeconomicsconsiderations, and likely spending overlap with the Structural andInvestment (ESI) Funds. The scope for coordination is evident as, on topof the new RRF Funds, EU countries will have to absorb the unspent ESIFunds from the 2014-20 Multi Financial Framework (MFF) and thoserecently allocated under the new 2021-27 MFF. Considering thesechallenges, we articulate a proactive resilience framework for thedesign and implementation of policy instruments in the EU