The Next Generation EU (NGEU) programme, with its core element the Recovery and Resilience Facility (RRF), represents the largest joint EU investment initiative ever undertaken, with a potential overall volume of €650 billion. Up to €359 billion of this fund is set to be provided as grants to member states. Launched in 2021 and running until the end of 2026, the programme is based on EU joint borrowing—a departure from sacrosanct public debt principles on an unprecedented scale, made politically possible against the background of the Covid-driven economic crisis throughout Europe.
The National Recovery and Resilience Plans (NRRPs) agreed between the European Commission and member states must be based on so-called “milestones and targets,” largely aligned with the “country-specific recommendations” of the European Semester. Each national plan must cover six areas of investment, with at least 37 per cent dedicated to “green transition” and another 20 per cent to “digitalisation.”
Media coverage of NGEU and RRF—where it exists at all—has been dominated by criticism of the sluggish utilisation of funds in most countries. This is undeniably a serious problem, rooted in factors including the programme’s complex procedures, a time frame too tight for larger infrastructure projects, and deficiencies in public administration at regional and local levels well known from other programmes such as the Just Transition Fund. Nevertheless, it is equally important to examine the funded projects themselves: their purpose and their outcomes. This is precisely what we did in a recent transform!europe project based on six country studies (Denmark, France, Germany, Italy, Poland, and Spain), guided by a simple key question: “What has the money been spent on so far?”
The green record is mixed but far from negligible
A closer look at “green transition” investments offers a flavour of the largest part of the expenditure programmes. Numerous projects target the decarbonisation of public transport, including expansion of rail networks and electrification of urban bus services. Others promote e-mobility for private individuals and companies through various mechanisms, from purchase premiums for battery electric vehicles to public support for expanding charging infrastructure. Still more focus on energy-efficient building and heating renovation—often, in the case of private buildings, through financial subsidies for replacing heating systems.
Taken together, the studies on the countries in our sample convey a general picture: it would be inappropriate to disregard the important and positive outcomes of NGEU across the board. Unsurprisingly, however, our country studies also identify numerous projects questionably labelled as “green.” Consider Danish subsidies for CO₂ storage in the North Sea—highly controversial among climate researchers—granted to a company that continues to develop and exploit new oil deposits there. More fundamentally, governments such as those of Italy and Germany make it difficult to recognise overriding strategic priorities for a “green transition” within their NRRPs. Certainly, individual sensible projects exist in these countries too, such as promoting the high-speed rail network in Italy with its positive impacts on the domestic supply chain, or the moderate promotion of charging points for electric cars in Germany. However, particularly questionable in both countries are practices of shifting public expenditure from national budgets to the NGEU fund—an approach that may relieve national coffers but neglects NGEU’s objective of enabling additional public investment.
Denmark and Spain show what strategic industrial policy can achieve
A prominent and particularly interesting example of the ambiguity surrounding country-specific implementation of NGEU/RRF is industrial policy. In general, explicitly industrial policy projects under the RRF remain scarce within our sample, and those that exist do not always serve clearly defined environmental or climate policy objectives. The overall impression conveyed by our six country studies matches the critique recently published by Wixforth and Soder: a serious lack of strategic industrial policy approaches, both at EU and member state levels, that combine green transformation with social justice. This makes examining the innovative exceptions all the more important, as they provide insights into both strengths and persisting weaknesses among advanced practices. In our sample, Denmark and Spain implemented the most clearly defined industrial policy programmes within the NGEU framework.
In Denmark, an Innovation Fund created in 2014 and other state funds have been expanded with NGEU resources to finance several large public-private networks, 14 of which are assigned to climate policy. These partnerships between numerous companies and public research institutions focus on undisputedly decisive issues: sector coupling including storage and utilisation of surplus electricity during periods of oversupply from renewable energies (Power-to-X), environmentally and climate-friendly agriculture, circular economy approaches to avoid plastic waste, and the already mentioned controversial Carbon Capture and Storage/Utilisation (CCS/CCU) project aimed at achieving a technological vanguard role for Danish industry. Question marks over the latter notwithstanding, it should be noted that the Danish government pursued a serious plan in climate-relevant industrial policy areas well before NGEU. The programme is now being used to enlarge the financial scope of this plan—which obviously makes it easier to disburse the full amount of the fund.
Another, more recent innovative industrial policy initiative is being implemented in Spain. With NGEU support, the Spanish government has launched “Strategic Projects for Economic Recovery and Transformation” (Proyectos Estratégicos para la Recuperación y Transformación Económica, or PERTE). These public-private networks must consist of five or more companies—45 per cent of which must be small and medium-sized enterprises—and invest at least €40 million. The Ministry of Economic Affairs establishes the PERTEs and appoints participants from companies, academia, and trade unions. Government agencies and research institutions are involved in coordination. The 12 projects funded by mid-2025 cover areas such as agriculture, e-mobility, hydrogen production and storage, industrial decarbonisation, and the circular economy. The collaboration between large and smaller companies, combined with strict state supervision of fund usage, represents a clear break with Spain’s prevailing business culture. To be sure, this does not make developing such networks any easier, and the high administrative effort involved in preparing them also complicates implementation within NGEU’s tight time frame.
Despite all concerns, difficulties, and downsides, these few innovative industrial policy networks must be regarded as examples of strategic approaches supported and extended (as in Denmark) or initiated and encouraged (as in Spain) by the NGEU programme. More broadly, they point to a general insight from our country studies: the extent to which opportunities provided by an investment programme such as NGEU are seized—for industrial policy in particular—depends primarily on member state governments.
Major reform requirements
This observation can be demonstrated by examining three major shortcomings in NGEU’s design and implementation. The first is the national limitation of EU-funded projects. What is striking about the various industrial policy support measures is that almost all are exclusively national in scope. If one country (like Germany) invests only hesitantly in expanding its hydrogen grid, a neighbouring country (like Denmark) may have to delay or even halt its Power-to-X and offshore wind farm plans. Cross-border projects have been the exception even in an investment programme like NGEU, though they would be particularly crucial for overcoming the centre-periphery divide within the EU. As Andrew Watt stated at an early stage of NGEU, “there is an urgent need to invest in genuinely European public goods, such as transport and (renewable) energy connection between countries,” for which “a permanent borrowing capacity for the EU to finance such projects” is indispensable.
The second shortcoming is the lack of involvement of social actors—both in the design and implementation of respective NRRPs. In some, though not all, countries trade unions and other social actors have at least been informed about their government’s plans. Poland is the only country in our sample where—following the change of government in autumn 2023—a monitoring committee was established that includes representatives of local authorities, employers’ organisations, and trade unions, as well as academics and NGOs. The more general lack of social anchoring of such an important EU programme in many countries is related to a third shortcoming: the widespread absence of social and ecological conditionalities.
This is precisely what the European trade unions (ETUC) refer to when they demand that the NGEU programme must be continued and simultaneously reformed so that compliance with social standards and involvement of trade unions becomes mandatory. Werner Raza‘s plea that “industrial policy must include citizens and workers” points in the same direction, and the ÖFSE and Social Europe e-book he co-edited spells out the decisive role of such conditionalities for any industrial policy that aims to promote a transition that is green as well as just.
A conditionalities-based approach would tackle the basic design of EU investment funds more broadly, as Biegon et al. argued already at NGEU’s launch when they advocated linking such funds to specific criteria focused on socio-ecological and digital transformation while decoupling them from the European Semester. This plea becomes all the more relevant given that the European Commission considers NGEU’s “performance-based” approach a role model for the next Multiannual Financial Framework.
Using National Energy and Climate Plans (NECPs) as an example, the Bruegel authors Pisani-Ferry and Tagliapietra also argue for obliging governments to spell out their green investment needs and an implementation roadmap. To “keep the European Green Deal on track,” disbursement of EU green funds must then be made conditional on the efficient achievement of these indicators.
These targeted approaches and reform concepts are of fundamental importance for the basic idea that the “green” and “just” elements of a socio-ecological transformation must always be viewed as two sides of the same coin. Including conditionalities such as the purchase of “green” primary products based on high-quality jobs is crucial for urgently needed “green lead markets.” Simultaneously, allocating state funds linked to social conditions—job security and compliance with legal and collective bargaining standards—must be regarded as a cornerstone of both the democratic legitimacy and the chances of success of a green transition.
That this is not among the general requirements in the NGEU programme represents a fundamental shortcoming. Nevertheless, member state governments would have the option of attaching such conditionalities to the allocation of RRF funds. The observation that this remains the exception rather than the rule highlights the crucial role national governments play in implementing this EU programme.
A cautious outlook
To summarise, the positive examples of meaningful NGEU fund usage for “green” industrial policy presented here—still far too few—show one thing above all: the NGEU programme has offered all member states new or additional opportunities. It has been up to them to seize these opportunities and to decide how to deploy them, particularly for an industrial policy oriented towards transition that is both green and just.
The differentiated approach of the ETUC, which argues for both continuation and reform of NGEU, is therefore more than justified. And it should not be forgotten that the Draghi Report describes NGEU as “a well-established precedent” for its proposal of “regular issuance of common safe assets.”
However, against the background of current political developments, it is fair to say that the chances of continuing the NGEU programme—let alone reforming it—are not good. As Guillaume Duval accurately summarises, “for the self-styled ‘frugal’ coalition, and for the German government committed to balanced budgets, this joint borrowing was to remain a one-time exception.” All the more important, then, is the experience that implementation at member state level has played a decisive role. The debate on continuing NGEU therefore cannot be confined to Brussels or Strasbourg. It must also be pursued in the member states where the benefits would be felt.
Steffen Lehndorff is Research Fellow at Institut Arbeit und Qualifikation (Institute for Work, Skills and Training / IAQ), University of Duisburg-Essen, Germany. Before retiring he worked as the Head of Department on Working-Time and Work Organisation at IAQ. His areas of comparative research include problems of socio-ecological transformation, European industrial relations systems and trade union strategies.
