Prometheus Publication: Boosting Digitization in Southern Europe. The role of national recovery and resilience plans and the current EU political agenda
PromethEU’s latest joint paper explores the digital dimension of Resilience and Recovery Plans (RRP) from the four countries of the PrometheEUs network – Greece, Italy, Portugal and Spain. After outlining the possibilities and challenges of the digital transition of each national RRP, the concluding part adopts a broader perspective and a comparative approach of the four plans.
The RRP funds (grants and loans) allocated to the digital transition by the four southern European countries amount to 81 billion euros, out of a total of 131.5 billion euros for all the States members. These four southern European countries can count on most of the available resources (61.6%) to bridge the digital divide with the most advanced Member States and improve the lives and productivity of their citizens.
Summary
The PromethEUs network of think tanks, made up of the Royal Elcano Institute (Spain), the Institute for Competitiveness (Italy), the IOBE – Foundation for Economic and Industrial Research (Greece) and the Institute of public policies – Lisbon (Portugal), presents a joint document on the role of the digital transition in the recovery and resilience plans (RRP) of their countries.
In this report, we focus on the digital dimension of the Resilience and Recovery Program (RRP). The goals, defined when it was designed and approved (prior to Russia’s invasion of Ukraine), were to mitigate the economic and social impact of the pandemic and to make economies and societies more sustainable and better prepared for the green and digital transitions.
Funds potentially allocated to the RRP (including loans) represent nearly 90% of NGEU funds. According to the rules of the RRP, each Member State should allocate at least 20% of its Resilience and Recovery Facility (RRF) to the digital pillar.
Unlike traditional EU budget funds (both MFF 2014-17 and MFF 2021-27) which are earmarked but generally unconditional transfers to Member States, the RRF funds are transferred with a more performance-based orientation. This is why each Member State must provide information on KPIs (key performance indicators) and the Commission will monitor whether the objectives are achieved or not. This means that the information on these KPIs must be publicly available, complete and clear, and that there must also be a clarification of the priorities of each Member State in the digital pillar in terms of reforms and investments in structural changes. of their economies and societies.
Chapter 1 – The Greek RRP
Summary: explores the Greek RRP as a valuable opportunity to reduce the economy’s large investment gap and accelerate reforms aimed at improving productivity. Greece’s Recovery and Resilience Plan (RRP) “Greece 2.0” includes a total funding envelope of €30.5 billion, or 17% of the country’s annual GDP, the largest by percentage in the EU .
Contributors: Georgios Gatopoulos, Maria Theano Tagaraki, Aggelos Tsakanikas, Michail Vasileiadis (IOBE, Foundation for Economics and Industrial Research).
Chapter 2 – The Italian RRP
Abstract: emphasizes the importance of the digital dimension in the Italian RRP. Digitization and innovation of processes, products and services are incorporated in almost all the policies of the Italian RRP, which amounts to approximately 191.5 billion euros. The funds will contribute to reducing the digital divide between Italy and other European countries in general, by promoting increased investment in digital technologies, infrastructures and processes.
Contributors: Stefano da Empoli, Afroditi Karidomatis, Lorenzo Principali, Daniela Suarato (I-Com, Institute for Competitiveness).
Chapter 3 – The Portuguese RRP
Summary: Focuses on the Portuguese RRP, which includes a total budget of €16.6 billion, with 22% of the total investment value allocated to digital transition. Portugal’s PRR is designed to address some of the country’s most significant bottlenecks, such as low productivity and low levels of education, an inefficient public administration and judicial system, towards sustainable and sustainable growth, preparing the Portuguese economy for the challenges of the years to come.
Contributors: João Cortes, Steffen Hoernig, Paulo Trigo Pereira (IPP, Institute of Public Policy).
Chapter 4 – The Spanish RRP
Summary: analyzes Spain’s RRP. With an amount of up to 69.5 billion euros, and through 212 measures, its objective is to move towards “modernization comparable to that of Spain’s accession to the EU”. The digital transition represents 28% of the total of the Spanish RRP and is present in all levers, programs and components.
Contributors: Raquel Jorge and Andrés Ortega (Royal Elcano Institute).
Spain’s recovery and resilience plan is recognized as aiming for “modernization comparable to that of Spain’s accession to the EU”. The RPP contains 212 measures (110 investments and 102 reforms) amounting to 69.5 billion euros. The Spanish RRP is the second largest in the EU, only after Italy. Specifically, Spain has requested 69.5 billion euros in subsidies. No loans have been requested so far. Its basic architecture consists of four pillars, 10 policy levers, 20 programs and 30 components. The green transition represents 40% of the total funds and the digital transition represents 28% of the overall financial envelope. Remarkably, Spain’s digital transformation journey is much larger than the EU’s 20% target and exceeds that of most EU member states.
Spain has ranked well ahead of most EU countries in recent years, according to the Digital Economy and Society Index (DESI). Based on the latest 2021 results, Spain ranks 9e out of 27 countries and is six positions above the EU average. However, the breakdown of the results highlights several strategic gaps for the long-term transformation of Spain’s industrial, economic, social and digital policies. While basic ICT skills are well established, Spain lags behind in advanced skills. Only 20% of companies provide ICT training to their staff. About 85% use digital technologies at a “low” or “very low” rate.
Three out of ten policy levers are largely devoted to digital – IV (public administration), V (companies and SMEs) and VI (science, innovation, health). However, digitization is also spreading to most other leversmainly in lever VII (education, skills, requalification and further training) and levers I and II, both of which relate to the green transition.
However, while the contribution of digital transformation across all 30 components exists, there are significant differences in the amount of resources devoted to each of them, including the levers that claim to fully address digital transition. Only 8 out of 30 components receive 40% or more resources for their digital transformation. 7 other components out of 30 receive between 10% and 40% of resources for digital transformation. This is particularly important, since the components “Industrial Policy Spain 2030” and the “Modernization and Competitiveness Plan for the Tourism Sector”, which are among those levers that are supposed to be heavily used for digital transformation, receive less than 40%.
Spain was the first country to receive a regular transfer from the European Commission under the Recovery and Resilience Mechanism. In 2021, the Commission disbursed €9 billion in pre-financing and gave the green light to a first disbursement of €10 billion.
RRP addresses specific policy measuressuch as targeted programs for the digitization of SMEs, the improvement of interoperability between state and regional public administrations and the strengthening of digital systems in educational centers (although there are no other advanced reforms , such as the digitization of the centers’ internal management systems, which can have positive long-term effects).
The Spanish NRRP largely touches on the digitization of industry. However, it plans to “strengthen a full-fledged digital industry”, called “industrialization of digitization”, for intangible and tangible goods, although still insufficiently.
Spain has established several LOSS, which are strategic projects with a great capacity to stimulate economic growth, employment and the competitiveness of the Spanish economy, with a high degree of public-private and cross-cutting collaboration with the different administrations. To date, 11 LOSS have already been decided or are in progress. Four of them are related to digital: electric and connected vehicles, the new language economy, the aerospace industry and the digitization of water uses. A new LOSS was recently announced on semiconductors.
Main findings and challenges are the following:
- Adding “the industrialization of digitalization” to the “digitalization of industry”, including a Deep Tech component, would be extremely important.
- Reforms should have been favored over investments because, while investments have a greater short-term impact as a temporary economic stimulus, reforms lead to long-term changes in the structural economic model.
- It is essential to guarantee transparency in the decentralized implementation of financing between the different authorities, territorial levels and public bodies.
- It is recommended to create a mechanism for ex-post impact assessment.
Chapter 5 – The four plans in a European perspective (I-Com, Institute for Competitiveness)
Summary: After briefly highlighting how certain areas of intervention appear to be common to the four plans and identifying some of the regulatory proposals at EU level mainly related to these areas, Chapter 5 focuses on how the four RRPs relate to the others. RRF Facility plans, as well as other digital funds at EU level. The focus areas considered in the chapter are connectivity, digital skills, digital transformation of public administrations (also related to data strategy and cloud migration), cybersecurity and artificial intelligence (AI) .
Contributors: Stefano da Empoli, Afroditi Karidomatis, Lorenzo Principali, Daniela Suarato (I-Com, Institute for Competitiveness).
