The European Commission has announced that €13.5 billion ($14.3 billion) will be paid out to Germany from the Recovery and Resilience Facility, better known colloquially as the COVID-19 pandemic recovery fund, by the end of 2024. Yet this payout is not some kind of surprise Christmas present for Germany's collapsed coalition government. So what is the fund all about?

Common debt

In 2021, after the worst of the COVID-19 pandemic, EU member states set up an assistance fund. It was designed to help boost the continent's economy following the coronavirus crisis. It was the first fund to be financed with common debt and currently holds a total of €650 billion, according to the European Commission. Of this, €359 billion will be paid out as grants, while €291 billion go to cheap loans requiring repayment.

Boosting investment

Each member state has been allocated a certain share of the recovery fund, depending on its size, economic strength and pandemic-related strain. National EU governments must submit individual recovery plans and fulfill numerous conditions to receive grants or loans from the fund.

Its overarching aim is to promote investments in climate protection efforts, digitalization and sustainable competitiveness. The European Commission will assess each project and then release the funds bit by bit in consultation with a committee from the EU Council, which represents the EU member state governments.

Third payout for Germany

In September, Germany applied for a €13.5 billion grant and the EU issued a provisional approval. If the Council committee agrees, which is likely, the grant could be transferred to the German Finance Ministry before the end of the year. This is a routine process that the European Commission goes through with all member states.

Germany has already received €6.2 billion. As the largest EU member state, Germany is entitled to €30 billion in grants from the fund. Germany plans to invest in electric buses, childcare, school modernization, the digitalization of hospitals and in expanding its hydrogen network, among other things.

Italy is biggest recipient, followed by Spain

Italyis the biggest beneficiary of the EU fund, as it suffered greatly during the COVID-19 pandemic. Some €195 billion have been earmarked for Italy, with €72 billion to be paid out as grants and €123 billion as loans. Spain will receive the second-largest payout of €163 billion, followed by Poland's €60 billion and €40 billion for France.

Hungary is entitled to around €10 billion ($10.5 billion) in grants and loans, although they may not all be paid out due to its rule of law violations.

Unclear terms of repayment

A total of €175 billion in grants and €95 billion in loans have been disbursed to all 27 EU member states to date, according to the EU Commission. This means that not even half of all available funds have been distributed. The fund will be shut down by the end of 2026, so member states must be quick to draw up reconstruction plans and applications if they want to receive all allocated cash.

Together with several smaller initiatives, the COVID-19 recovery funding amounts to the largest investment program ever launched by the EU, as Commission President Ursula von der Leyen has repeatedly said. The fund debt will be repaid using the 2058 EU budget. The Germany Audit Office, however, has complained that repayment details remain unclear. Who will pay how much and when will have to be agreed on by future EU member state governments.

This article was translated from German.