Across olive groves and vineyards in Spain, sensors and drones are collecting soil data to power artificial intelligence models designed to help farmers manage crops more efficiently.
The technology-driven push is being financed by the European Union’s largest recovery programme since the post-war Marshall Plan, highlighting both the promise and the limitations of the bloc’s historic stimulus effort.
The initiative, aimed at decarbonising and digitalising agriculture, reflects the core ambition of the EU’s €955 billion “Next Generation” recovery fund, agreed six years ago in the wake of the COVID-19 pandemic and now approaching its final payout deadlines.
However, skills shortages, complex bureaucracy and uncertainty over long-term funding are increasingly raising doubts about whether the programme can deliver lasting economic transformation.
“The funds left us with data infrastructure, common governance and teams capable of operating AI at scale,” said Juan Francisco Delgado, a coordinator of the agriculture project.
“What they haven’t left us with is a business model,” he added, noting that his team is now working on a financial plan to develop the data platform, upgrade hardware and hire talent once the recovery money runs out.
The recovery fund was launched in 2020 as EU leaders grappled with an unprecedented collapse in gross domestic product caused by the pandemic. Its aim was not only to stabilise the economy, but also to push through reforms and investments that could accelerate digitalisation and sustainability across the bloc.
Spending the funds effectively has taken on renewed urgency as concerns over economic coercion from China and an increasingly hostile United States have sharpened awareness within Europe of the need to strengthen its economic defences.
More than €700 billion in grants and loans were made available to member states in 2021. That figure later fell to €577 billion after some countries declined to take up part or all of the loans on offer. Five years on, €182 billion of allocated funds have yet to be disbursed, according to Reuters calculations based on EU data.
The European Commission maintains that the recovery fund has met both its short- and long-term objectives. But officials, businesses and economists interviewed by Reuters say the results have been uneven.
There is broad agreement that the programme helped cushion the immediate economic shock of the pandemic. It also broke a long-standing taboo by introducing joint EU borrowing, a step that has since become a permanent feature of the bloc’s policy toolkit.
In addition, the conditions tied to accessing the funds — ranging from labour market reforms in France and Spain, to simplified renewable energy licensing in Italy, Greece and Portugal, and cybersecurity upgrades in Slovakia and Romania — could still deliver longer-term gains in productivity and growth.
However, delays in implementing reforms and rolling out spending have blunted any rapid boost to economic momentum. Growth across the euro area has remained sluggish since the post-pandemic rebound, lagging behind both the United States and China.
Member states have until 31 August to complete their reforms and until 30 September to submit final payment requests. In December, Spain renounced more than €60 billion in allocated loans, acknowledging it could not meet some required milestones in time due to supply chain constraints and unexpected technical difficulties.
The Spanish government also argued that its improved position in capital markets, supported by relatively stronger growth prospects, had reduced the advantage of borrowing through the EU, dampening demand for the loans.
In Italy, which had spent an estimated €110 billion of its recovery funds by last December, lawmakers and economists have warned that investment could fall sharply once the programme ends, further weighing on the country’s already fragile economy.
Italy’s EU Affairs Minister, Tommaso Foti, who oversees the recovery funds, struck an optimistic note in comments to Reuters.
“Now that we are in the implementation phase, the effects will be more tangible,” he said, adding that positive impacts on growth and productivity should become apparent from this year.
Economy Minister Giancarlo Giorgetti has repeatedly said Italy would replace recovery funding with other budgetary spending, though he has not provided details.
To extend the life of the programme, Spain has secured European Commission approval to use €10.5 billion of its recovery loans as capital for an additional €60 billion in state-backed financing, which it hopes will unlock billions more in private investment. Italy has also won EU backing to spend €23.5 billion beyond the original 2026 deadline.
Such flexibility is a sensible approach, according to Carsten Brzeski, an economist at ING.
“An easy way to make sure the money reaches the economy would be to extend the programmes by one to two years,” Brzeski said.
“Why not allow countries to deviate from fiscal rules if they implement structural reforms that bring relief for public finances in the long run?”
Boluwatife Enome
Follow us on:
