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Where are we with the PNRR?

Following the economic shock triggered by the Covid-19 pandemic, Europe, as we know, managed to garner the consensus needed to take a historic step: to pool its public debt to raise the necessary resources to support the member states who were hardest hit by the crisis. This tool, technically a new line added to the EU budget, is called Next Generation EU (NGEU). But today, everyone is talking about the National Recovery and Resilience Plan (PNRR) and not the NGEU. Why?  

Let’s start by talking about what the PNRR is not: it’s not the NGEU. The NGEU is a general assistance plan consisting of 750 billion (70% to be allocated by year’s end 2022, and the remainder by 2026 – all to be repaid in 2058), offered by the European Commission (EC) to member states for post-pandemic recovery.  

Of the 750 billion, around 360 billion are low-interest loans that will augment the public debt of the recipient member state, which that country will repay over time. Instead, 390 billion are grants that won’t inflate the public debt, but instead will be repaid by the EC with its resources (which means in a small measure by each beneficiary country too).  

These two types of financing take the form of two instruments: nearly 90% of the resources are funnelled into the Recovery and Resilience Facility (RRF), while the remaining 10% go to the Recovery Assistance for Cohesion and the Territories of Europe (REACT-EU).  

So now let’s discuss what the PNRR is. It’s a legal document that every member state was required to send to the Commission to access the RRF. With this document, negotiated between a national government and the EC and approved by the EU Council (for Italy on 13 July 20219), our country was given access to 191.5 billion, 68.9 of which comes in the form of grants and 122.6 in loans. Added to these amounts is a €31-billion Complementary Fund, entirely managed by the Italian government and financed with debt, to complete the initiatives of the PNRR with the same timing and disbursement method. 

How will this €191.5 billion be spent? The Italian PNRR follows the strategic axes established in the NGEU which are divided into six “missions”: digital transition and innovation, infrastructures for sustainable mobility, education and research, inclusion and social cohesion, and health. Here’s the breakdown of resource allocation of the Italian PNRR: around 25% will go to accelerate the innovation and digitalization process (both at a public and private level); another 37.5% to ecological transition; and at least 40% of the funding must be earmarked for initiatives that promote development in Southern Europe. Investments in youth employment and equal opportunities are also transversal priorities of the Plan. 

A key component of the PNRR is the mechanism for disbursing the resources in question. It’s no coincidence that we don’t talk about a recovery “fund,” or if we do, it’s inexact. The credit line of the PNRR, as we mentioned above, is actually called a “facility.” This implies that reporting and audit activities on the financing line are not centered on expenditures (typical of any public funding), but instead centers on specific outcomes, which were established jointly together with the destination of the resources in question.  


Every six months, the European Commission checks that the member states have met the (quarterly) deadlines set down in their respective PNRRs. Only after this verification, the Commission disburses the resources as agreed. Underpinning this process is an operating agreement that every member state has signed with the EC, which provides for quarterly assessments to monitor the progress of national PNRRs. The Italian plan sets down a total of 527 outcomes to achieve from now until 2026, which have been divided into either milestones or targets. Milestones are assessed in a more qualitative way, and usually have to do with the approval of regulatory or administrative measures, which are typically associated with reforms. Targets are verified with quantitative indicators (for example, the number of companies that are beneficiaries of the financing, or the increase in personnel in the courts), and are typically tied to investments. To put it more simply, milestones are deadlines that come before targets, in chronological order, as milestones usually incorporate the necessary steps (reforms) to ensure that investments are effectively deployed. Italy’s PNRR sets a total of 213 milestones and 314 targets. In addition, there is a roadmap “set in stone” which marks precise quarterly deadlines for each intervention. 

So where are we on this roadmap to complete the PNRR? As of today, around 100 billion have been assigned to the so-called “implementing bodies” (ministries, local authorities, or state-owned companies) through a competitive procedure. The first two assessments by the EC on the timing of milestones and targets (in December 2021 and June 2022) have been positive. This has allowed us to free up successive tranches of financing. We’ll be waiting until early 2023 for the evaluation of the current quarter (which will end in December 2022). So as far as this aspect of the PNRR is concerned, we’re on schedule.  

Not surprisingly, where we are accumulating delays is in transitioning from allocating resources to the implementing bodies, to actually spending this money through actions on the ground. This step requires organizing calls for tenders, awarding contracts, drafting progress reports, and relative reporting. The most recent data from the Government (Nadef) tell us that out of around 29.4 billion that we should have spent in 2022, we will manage to spend about 15 billion by the end of the year.   

From this standpoint, what is essential to understand is whether the resources allocated by the PNRR to the implementing bodies end up in the hands of the organizations that are capable of managing this money efficiently. The SDA Bocconi PNRR Lab, which has been active since July 2022, has the mission of monitoring PNRR implementation, also through the development of policy proposals not only fostering investment allocation in keeping with the general guidelines of the plan, but also monitoring the effectiveness of the allocation post-disbursement.  

A key policy objective, in fact, is to ascertain whether or not the investments have had the desired effect. Analyzing the available data (on OpenCUP, the portal of the Department of Economic Planning at Palazzo Chigi, the Prime Minister’s office) at the provincial level, preliminary evidence shows that resource distribution seems to reflect the objective of creating convergence between the North and the South of the country, as the Central and Southern provinces tend to obtain more resources per capita than those in the North, with the provinces of Benevento (5.5 thousand per capita) and Rieti (4.5 thousand) in the lead. Breaking down our analysis further by missions, what becomes clear is that the biggest imbalance in favor of the South appears in Mission 3: infrastructures for sustainable mobility, which includes major interventions on the railway network. So at the provincial level, we are seeing promising signs. 

But there’s a risk here. If in fact the best local administrators do a better job of attracting funds, the risk is that most of the money goes to areas that need it less than others, relatively speaking. If we measure the allocated financing against institutional quality indices, in fact, the data confirm that Southern regions get more money on average. But looking more closely at this part of the country, it is the provinces with relatively higher institutional quality that attract the most resources.  

We find a similar situation when we compare resources allocated by Mission 5 (Education and Research) according to school dropout rates or the quality of primary schools. More financing per capita for schools goes to regions with higher dropout rates, but places with the highest dropout rates such as Sardinia and Calabria are only marginally above the national average in terms of per-capita financing for schools. 

If we turn our attention to the data on building schools, we find that regions with older schools again have received only slightly more funding per capita. And within each region, the PNRR resources allocated to school construction do not always reach the local communities with older school buildings that are less energy efficient.  

So what becomes most important is to monitor not only resource allocation but also the actual impact of these resources on the ground, to ensure timely course corrections if the effects don’t align with the priorities of the PNRR. For example, it makes sense that the lion’s share of the financing is concentrated in the parts of the country that are currently lagging behind in terms of institutional quality. But we must keep in mind, at least for the time being, that in the South the funding is being channelled to whoever is relatively more efficient in spending it. This means we need to invest in tools that enhance the administrative skills in the less efficient areas (for example to attract funding) to avoid further exacerbating (instead of attenuating) the inequalities that exist in our country.