Fostering Economic Growth and Sustainability: how to unlock EU Funds potential in CEE

Maximilian Plank,
Export & Investment Finance, RBI

Can you explain the Next Generation EU (NGEU) funding instrument and its progress?

The NGEU is a temporary funding instrument of the European Union designed to mobilise up to 723 billion euro in grants and loans to encourage investments and structural reform measures. If fully implemented, the NGEU could increase the real GDP in the euro area by up to 1.5 percentage points by 2026, significantly lifting growth prospects. As of now, two and a half years into the program, the Recovery and Resilience Facility (RRF) disbursements have reached 107 billion euro, which is more than 30% of the total expected to be requested by EU countries in the period 2021-2026.

How are Central and Eastern European (CEE) countries performing in terms of accessing these funds?

The performance varies among CEE countries. Among the CEE countries, only Croatia and Slovakia have received the second disbursement. Croatia is the only CEE country to have submitted an application for the third payment. In some countries like Poland and Hungary, required structural reforms have been delayed, affecting the disbursement schedule.

In summary, how important are the EU funds for growth in the CEE region?

Despite the obstacles, EU funds are expected to be one of the key drivers of growth in the coming years. This is evident from the 2023 economic indicators and projections for CEE countries. The funds also present significant opportunities for foreign companies operating in the CEE markets. However, the successful utilization of these funds depends on efficient management and timely implementation of necessary reforms.

Could you expand on the economic impact of EU funds?

EU funds have a significant multiplier effect on the economy. They provide muchneeded capital for businesses to invest in research and development, innovation, infrastructure, environmental protection, and training. This can lead to job creation, increased competitiveness, and improved products or services, all of which contribute to economic growth.

Looking ahead to 2024, which Central and Eastern European (CEE) countries do you see as having the most potential in terms of EU Funds and the Recovery and Resilience Facility (RRF)?

As we look ahead to 2024, several Central and Eastern European (CEE) countries are emerging as frontrunners in the race for EU Funds and the Recovery and Resilience Facility (RRF). Maybe just to pick some examples: Poland, despite current delays in accessing funds due to postponed structural reforms, has a strong track record of absorbing EU funds. With its large population and robust economy, Poland possesses significant potential for future funding. Once the current issues are resolved, we can expect Poland to actively tap into the available EU funds and RRF.

Croatia, meanwhile, has shown a high level of engagement with the RRF. It is the only CEE country to have submitted an application for the third payment, suggesting a proactive approach and a high potential for further funding. This level of initiative bodes well for Croatia’s future in accessing and utilising EU funds.

Lastly, Romania and Bulgaria, with their substantial development needs, are countries with high potential for EU funds. These nations have opportunities to significantly improve areas such as infrastructure, digital transformation, and the green economy, using the available EU funds.
However, it’s important to note that the potential of these countries isn’t just about the funds accessible to them. It also heavily depends on their ability to effectively manage and utilize these funds and implement necessary reforms. The road ahead is paved with opportunities, and these CEE countries are well-positioned to leverage EU funds for economic growth and development.

How can banks, such as Raiffeisen Bank International, support their customers and promote growth?

Banks can play a crucial role in supporting their customers and fostering growth in several ways. Firstly, they can provide Financial Advisory services, helping customers understand various EU funding programs, identify suitable opportunities, and prepare successful applications. Secondly, once the funds are received, they can assist customers in managing these funds effectively. This involves ensuring compliance with EU regulations and following best practices in financial management. Lastly, banks can offer tailored financing solutions and investment opportunities that align with their customers’ business goals and the broader economic growth agenda.

Can you discuss the role of banks in supporting the necessary transition towards energy efficiency and emission reduction in the light of EU Funds?

The goal of EU funds is to support economic development across the European Union, particularly in less developed regions, and to promote cohesion and reduce disparities among various regions. The funds aim to stimulate growth, create jobs, and promote innovation and competitiveness. They also support various policy objectives of the EU, such as climate change mitigation, environmental protection, social inclusion, research and development, digital transformation, and public health.

The transition towards a more sustainable, low-carbon economy is a major challenge that requires significant investment. Banks have a crucial role to play in this transition.

Firstly, banks can provide financing for green projects. This could include loans for renewable energy projects, energy-efficient building construction, or the development of low-emission technologies. By providing capital for these projects, banks can help accelerate the transition to a greener economy.

Secondly, banks can offer advisory services to help businesses understand and navigate the complex landscape of green financing. This includes providing advice on available green grants, loans, and tax incentives, as well as assistance in applying for these funds.

Thirdly, banks can support the transition by integrating environmental, social, and governance (ESG) criteria into their lending and investment decisions. This can encourage businesses to adopt more sustainable practices.

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