EU funds, including the Recovery and Resilience Facility (RRF), have become a crucial funding source for investment in Member States in recent years. The end of the RRF in 2026 leaves a gap, which is expected to be partially filled in 2027 by other EU funds. This box presents recent trends and the outlook for EU-funded expenditure.
Government expenditure (including tax expenditure) financed by RRF grants in the EU amounted to EUR 160 bn until the end of 2024, corresponding to around ¼% of GDP each year from 2021 to 2024. Further EUR 35 bn of expenditure in Member States was financed by RRF loans by the end of 2024. This leaves more than half of the budgeted EUR 359 bn grant funds, and an even larger share of the EUR 291 bn loan funds, to be spent over the forecast horizon, implying a significant pick-up of expenditure by 2026, the final year of the RRF. ([1]) Based on guidance provided by the Commission in a Communication on 12 June, ([2]) most Member States have revised or are in the process of revising their Recovery and Resilience Plans (RRP) to simplify them and to facilitate the achievement of all milestones and targets by 31 August 2026, and the full disbursement of the remaining RRF grants by 31 December 2026. The revised RRPs must continue to comply with all assessment criteria laid down in the RRF Regulation, and some of the options presented in the Communication include the scaling up of existing measures, the continuation of projects beyond 2026 using national or other EU funds, incentives for private investment through financial instruments (including InvestEU), or equity injections into national promotional banks, and contributions from the RRF to the future European Defence Industry Programme (EDIP) and EU satellite programmes.
Although the RRF is a temporary instrument, its macroeconomic impact is set to last beyond the 31 August 2026 deadline for implementing the RRPs. First, some of the relevant expenditure that is financed by RRF grants, and which provides an impulse to GDP growth, might take place after that deadline. ([3]) Second, financial instruments set up from RRF grants or loans continue to provide financing to the private sector at favourable terms beyond 2026. Last but not least, the investment and structural reforms carried out by Member States in the context of the RRF can raise productivity and income levels in the longer term. ([4])
The fading of the direct fiscal impulse provided by the RRF is also expected to be offset by increased utilisation of other EU funds. Cohesion policy spending in the 2021-2027 programming cycle has been modest so far: until August 2025, just 11% of the planned spending had been implemented by Member States according to the Cohesion Open data platform (see Graph 1), and only 13.5% of the EUR 378 bn cohesion policy envelope had been disbursed from the EU budget by the cut-off date of this forecast. This points to a slower utilisation of cohesion policy funds than in the previous MFF cycle, leaving significant scope for EU-funded expenditure over the remainder of the programming cycle. The recently concluded mid-term review of cohesion policy ([5]) provides Member States with greater flexibility and incentives to deploy existing resources more rapidly and accelerate programme implementation. It also aligns cohesion policy investments with new priorities, notably defence and security, competitiveness and decarbonisation, affordable housing, access to water, water management, energy transition and challenges facing Eastern border regions. In addition, the review also extends the eligibility period of spending from 2029 to 2030 under certain conditions. The newly created Social Climate Fund is also expected to disburse EUR 65 bn to Member States between 2026-2032 from the revenues of the emissions trading system ETS, and its extension ETS2 (see Special Issue 3).
| Graph 1: Cumulative cohesion policy spending in the EU (% of total envelope) | Graph 2: EU funds and public capital expenditure in the EU |
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The horizontal axis shows the implementation years of the current Multiannual Financial Framework, and the respective years of the previous MFF cycle. The figure for 2025 is an estimate based on spending data for January-August. Source: Cohesion Open Data Platform. | Government capital expenditure is the sum of gross capital formation by the general government and capital transfers paid to other sectors. |
Overall, the increase in EU grants has contributed to a significant rise in government capital expenditure (including gross capital formation, investment grants and other capital transfers) from 3.4% in 2019 to a projected 4.6% in 2026. The end of the RRF is anticipated to lead to a slight decrease in EU grant-funded expenditure in 2027. As administrative resources are freed up after the end of the RRF, an uptick in the use of the remaining cohesion policy funds is expected, although the increase in spending may extend over the next two to three years. Despite this limited decrease, capital expenditure is projected to stay relatively high at 4.4% of GDP compared to historical levels (see Graph 2). Additionally, government capital expenditure in 2027 is likely to be supported by nationally-financed spending, including on defence. Finally, EU grants and loans are expected to continue supporting private investment through favourable financing conditions in 2027.
The impact of EU funds over the forecast period is expected to vary significantly across Member States. In the EU as a whole, EU grant-financed government spending is projected to rise by 0.2% of GDP from 2024 to 2026 (see Graph 2). However, it is set to rise by more than 1% of GDP in Bulgaria, Greece, Latvia, Poland, Portugal and Slovakia. The decrease from 2026 to 2027 is influenced by the relative size of Member States’ respective RRF and cohesion policy envelopes. Some Member States with larger RRF grant allocations (such as Greece, Portugal and Spain) are projected to experience larger drops of EU grant-funded spending in 2027, while the decrease is set to be less pronounced among Member States with large cohesion policy envelopes (such as Croatia or Romania).
Footnotes
([1]) These amounts refer to the government expenditure recorded in national accounts (as well as reductions in tax revenue compensated by RRF grants; see Eurostat table gov_rrf_use), which should not be confused with disbursements to Member States on the basis of pre-financing, and approved payment requests following the fulfilment of relevant milestones and targets (see Eurostat table gov_rrf_fa). Note that expenditure financed by RRF loans does not appear in the Commission’s fiscal stance measure. However, RRF loans can still have a positive impact on aggregate demand because they extend governments’ fiscal space by providing financing at favourable terms.
([2]) European Commission (2025): NextGenerationEU – The road to 2026. Communication from the Commission to the European Parliament and the Council, COM(2025) 310 final/2. [link]
([3]) For example, when an RRF measure foresees investment grants to private companies, the relevant milestone for fulfilling the measure (and disbursing the funds from the EU to the Member State) might require the signature of contracts with final beneficiaries in 2026, and the transfer of funds from the government to the implementing partner, but the actual investments by the private companies might take place in 2027.
([4]) For a literature review of the long-term impact of structural reforms, see for example García, L., J. Guigue and L. Vogel (2024). “How to Assess the Growth Effect of Structural Reforms?” European Commission (DG ECFIN), European Economy Discussion Paper 215. For an assessment of the impact of structural reforms related to the RRF, see Bankowski, K. et al. (2024). “Four years into the NextGenerationEU: what impact on the euro area economy?” European Central Bank, ECB Occasional Paper No. 362.
([5]) Regulation of the European Parliament and of the Council amending Regulations (EU) 2021/1058 and (EU) 2021/1056 as regards specific measures to address strategic challenges in the context of the mid-term review; and Regulation of the European Parliament and of the Council amending Regulation (EU) 2021/1057 establishing the European Social Fund Plus (ESF+) as regards specific measures to address strategic challenges.