Next Generation EU: Perspectives for Bulgaria in the context of REACT-EU   

At a Special European Council held in July, EU leaders reached a key agreement on a COVID-19 recovery plan. The European budget for the next seven years was approved, as well as an unprecedented emergency funding instrument - Next Generation EU. The resources under the latter will be distributed among various initiatives, including REACT-EU (Recovery Assistance for Cohesion and the Territories of Europe).

What is REACT-EU?

REACT-EU aims to provide immediate assistance to the economies of the EU Member States in the form of extraordinary additional resources for the period 2020-2022. The initiative provides 55 billion euros of additional funding under cohesion policy programmes, 5 billion of which will be provided to Member States as early as 2020 by adapting the current multiannual financial framework (2014-2020). The urgency of the REACT-EU funding will guarantee the continuity of the financing of key measures to overcome the crisis and to assist the most affected ones.

The additional funds are distributed among three structural funds - the European Regional Development Fund (ERDF), the European Social Fund (ESF) and the Fund for European Assistance to the Most Deprived (FEAD). Moreover, when absorbing the funds, Member States will be able to implement the extraordinary flexibility measures introduced earlier this year, such as the possibility of transferring resources between funds and alleviating co-financing rules, which now allow funding entirely from the EU budget.

Resources under REACT-EU are allocated to each EU Member State according to its relative prosperity and the socio-economic effects of the crisis. Exceptionally, funds are not broken down per region or sector, which allows the targeting of areas (geographical or sectoral) where support is needed the most. A high level of pre-financing (50%) is envisaged, which will be available to Member States as soon as the European Commission approves the relevant programmes or amendments to programmes under which the funds will be channelled. REACT-EU measures will contribute to supporting job creation and maintenance, including through short-term work schemes and support for the self-employed, and will provide emergency support directly to SMEs.

Bulgaria and REACT-EU

Bulgaria has been allocated BGN 1,283 billion under the REACT-EU initiative, which will come as fresh funds under existing cohesion policy programmes. These funds can be used for investments in support of job retention, healthcare, investment for SMEs. In order to absorb the funds, the Bulgarian administration has to prepare new procedures for existing operational programs, such as "Innovation and Competitiveness".

On 12 August 2020, the Council of Ministers adopted a Decision for an indicative allocation of REACT-EU funds under Operational Programs 2014-2020, while the final allocation is expected in October this year. As early as August 13, the Ministry of Economy held a meeting with trade unions and employers' organisations, followed by a briefing, during which it was announced that two measures will be financed with REACT-EU funds. It was also revealed that the Ministry of Economy has been indicatively allocated BGN 391,166 million, which will be used as follows:

    1. Digitalisation, recovery and growth potential:

    ► indicative budget – BGN 291 million

    ► investment programme with a payment intensity of 80% (20% self-financing)

    ► first element: digitalisation - includes all ICT systems for more innovative and cost-saving business

    ► second element: investment for recovery and growth - includes internationalisation, investment in technologies to improve the environment, introduction of renewable energy sources, including those for own electricity generation, aimed at reducing costs

    2. Digital and green innovation:

    ► indicative budget: BGN 100 million

    ► investment programme with a payment intensity of 80% (20% self-financing)

      What now?

      Specific application procedures for both measures are expected to be developed and approved shortly. The Ministry of Economy envisages amendments to the Management of Resources from the European Structural and Investment Funds Act (MRESIFA) in September with regard to the shortening of procedures for receiving funds by businesses.

      One of the most significant features of REACT-EU is that it offers almost immediate access to financial assistance, which is expressed in pre-financing - for instance, 50% of the funds provided for Bulgaria for the year of 2020 will be received as soon as the European Commission approves the country’s cohesion programmes or their amendments.

      The application procedures to be developed by the Ministry of Economy are not clear yet and obtaining funding is directly dependent on them. As announced by the Minister of Economy in the briefing of August 13, 2020, in order to arrange for the rapid absorption of funds, negotiations are underway and the economy administration will be working in close cooperation with the Ministry of Finance and the private sector. 

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