Reversals in the Recovery Fund due to inflation

By Tasos Dasopoulos

High inflation also changes the physical scope of many of the Development Fund projects, since the initial budget is no longer sufficient to complete them based on the original planning.

The biggest problem is found in infrastructure projects, such as road axes, interventions in railway infrastructure, but also some of the projects concerning RES. The issue of the cost of each project has two very difficult parameters.

The first is that the prices of raw materials and fuel continue to rise, but the budget cannot change continuously. Therefore, in each project there should – after negotiation – be a “red line”, so that the contractor of each project should commit to a specific physical object for each project, which should be completed based on the planned schedule.

The second parameter that worries the Ministry of Finance is any appeals from companies that participated in the tender for each project and “lost” it, since they could not offer a greater discount than those who were finally appointed contractors. All of them, seeing the budget stay the same but the physical object reduced, may feel wronged and block construction with an appeal that will put the construction of the project off schedule.

This, at a time when the Recovery Fund has a very specific completion time until the middle of 2026, while at the same time the construction of each project is locked with specific milestones. The delay in the implementation of the milestones will also delay the payment of installments. The solution in these cases too is a compromise with the “losers”, so that they do not risk losing money from the Fund’s resources.

The REPowerEU

A second issue that is becoming a concern for the Ministry of Finance is the REPowerEU program, which has been on hold for a month now… a statement by the President of the European Commission, Ursula von der Leyen. The Commission has not completed the regulation of the program so that the member states have a guide to propose their projects. There is only an indicative date that this regulation will be ready by the end of the month.

However, even if this date is passed, countries that want to implement the program will have to wait until September, as August is a holiday month for the European Commission. Athens is currently sticking to its original plan to claim another 5 billion euros from the 225 billion unused loans of the Recovery Fund and 1 billion from the 20 billion that the Commission will make available from the revenue account from polluters’ rights.

In the meantime, of course, it will have to be defined at national level and which of the NSRF 2021-2027 funds will be allocated to REPowerEU to complement the budget of the new program, which as is known will be a branch of the Recovery Fund and will be completed together with the remaining Greece 2.0 projects in mid-2026.