Italy completes just €3.7bn of recovery fund

The EU’s Recovery and Resilience Facility (RRF) is the €577 billion fund set up in 2021 to rebuild economies after Covid. Its clock runs out on 31 August 2026. After that, no new milestones count. By 30 September, every payment request must be in. Money left unused falls away. So far, about 58% of the fund has been paid out to governments (European Commission, ING Think). The harder part begins after a government receives the cash: turning it into a hospital, a railway line, a digital system or support for a small business.

Italy collected the cash. The projects didn't follow.

Italy is the clearest warning. Rome has drawn €166 billion, or 85% of its €191 billion allocation, the largest in the EU (Italian government). Yet Italy's Court of Auditors found only €3.7 billion in projects actually completed (upday, Il Resto del Carlino). The rest is somewhere in the machinery: approved, contracted, revised, delayed, or waiting for somebody with the time and authority to move it on.

That matters because thousands of small municipalities were given funding they were never properly equipped to manage. Procurement, oversight and reporting all require staff. Many local authorities do not have enough of them. The familiar north-south divide is visible in the numbers: Sicily has a 22% payment rate and Calabria 25%, while Veneto is at 47% (Il Foglio).

The administrative shortage has collided with a physical one. Construction costs have risen 40% since 2022, while the EU grants behind these projects were priced in 2021 (Legacoop Romagna). A contractor wins a school renovation at one price, then materials consume the budget before the roof is on. In 2025, Italy's building sector recorded 13,500 insolvency proceedings (Unioncamere). Each collapse leaves a public works project stranded behind it.

Further east, the problem is sharper again. Hungary has received just 9% of its €10.4 billion, with €9.5 billion frozen in rule-of-law disputes (Portfolio.hu). Romania faces potential penalties of €15 billion, with 38 milestones still unmet (DCNews). Bulgaria has managed to absorb only 53% after seven governments since its plan was approved.

Survival by shrinking ambitions

The countries that look more successful have often survived by making the plans smaller. Portugal avoided losing €2 billion by reprogramming its plan three times. It dropped Lisbon and Porto metro lines, halved housing targets and cut healthcare beds by 40% (Eco/Sapo, Observador). It also channelled €964 million into a development bank whose loan programmes need contract signatures, rather than completed projects, to be counted as "executed" (Conta-la.pt). Portugal's own oversight body asked the obvious question: "Are we sacrificing impact?"

Greece, which has drawn 68.5% of its €36 billion package, faces a different squeeze. Demand for its cheap RRF loans, with interest rates of 0.3–1%, exceeds supply by €6–8 billion (News247). When those loans stop, businesses will be pushed back towards market rates three to four times higher (Protothema).

A flaw baked into the design

The European Court of Auditors has identified the central weakness. The RRF pays against milestones, not actual costs. If a milestone has been formally met but the underlying investment is never finished, there is no mechanism to claw the money back (ECA Special Report 13/2024, eucrim).

Bruegel, the Brussels-based economics think tank, has put its finger on the deeper problem: performance-based payments require strong institutions (Bruegel). Romania, Bulgaria and Hungary, the countries with the weakest administrations, are also those most in need of transformation. The fund was meant to narrow gaps. In practice, it has often followed the same old fault lines.

The European Fiscal Board estimates that RRF grants added roughly 0.25% of GDP a year to EU public investment, a lift that disappears in 2027 with nothing ready to replace it (European Fiscal Board). The next EU budget cycle starts in 2028, and negotiators have not agreed whether a permanent investment tool should exist at all. The question now is how much money will vanish, and how visible the hole will be when it does.