A recent Communication of the European Commission observes that “the most notable success of the RRF [Recovery and Resilience Facility] so far is the coherent sequencing between reforms and investments and a results-based approach that is pivotal to the program’s effectiveness”. The results-based approach, organised into milestones and targets, incentivises methodical planning and facilitates more efficient implementation, since milestones and targets represent concrete steps towards the implementation of each measure.

Reforms are the main benefit from the RRF. Investments – the other component of the RRF – can raise output growth in the short run but cannot cure Europe’s growth malaise; this requires reforms, something especially true in the case of Italy, the largest recipient of RRF funds.

Were Italy to fail in implementation of these reforms, the argument for repeating the use of EU common debt – for areas such as EU defence (as suggested by President Macron and others), the Green Transition, or the reconstruction of Ukraine – would run into insuperable opposition. For this reason, evidence of Italy’s progress in adopting the reforms, agreed as part of the RRF, is important.

The RRF has not had good press. In an article in the Financial Times on 11 May 2024, Tony Barber expressed considerable doubts about the ability of the RRF to improve on the unimpressive record of earlier EU initiatives, such as the Lisbon Agenda, which have been unable to reverse a pattern of “excessive regulation, not enough competition, insufficient incentives to innovate and invest”. Similarly, Boeri and Perotti (2023), based on scant evidence, argue that the Italian programme is a historic failure: no reforms and a waste of resources. Italy is investing, thanks to the RRF, an amount close to 12% of the country’s 2020 GDP. It is by far the largest portion of the RRF programme. If Boeri and Perotti were right, their evidence (recently echoed by Luis Garicano) would provide a decisive argument against repeating the RRF.

In CEPR Policy Insight No. 130 (Giavazzi and Goretti 2024), we document the disruptive role that the RRF can play, and is playing, in kick-starting long-delayed reforms in Italy.