HOUR vigorous and inflationary crisis pose serious risks to the compliance of their countries Eurozone in connection with Recovery Fundas warned Bank of America. In addition to the implementation risks associated with insufficient history absorption of EU fundsThe current macroeconomic environment also poses new threats to national recovery plans, with growth expected to slow from the second half of 2022 due to multiple headwinds affecting activity such as the energy crisis, ongoing price pressures, and the Russian-Ukrainian war.

The projects and investments based on the Recovery Fund were developed at a time when prices and supply problems were very different from today, the US bank said. Rising public works costs and vendor delays could derail implementation investments. For example, according to BofA, investments in transport and construction, which account for 18% and 8% of total EU funds, respectively. consequently, it may be “at risk” due to higher costs than originally envisaged.

Inflation and the energy crisis could derail investment.

An additional risk is associated with the high dependence of individual sectors on energy. The winter natural gas ratio scenario remains a major risk to the outlook for the eurozone economy and will have implications not only for growth, but also for meeting Recovery Fund targets. Some of the sectors most heavily targeted by national plans are heavily dependent on energy and therefore vulnerable to shocks in energy supply. An energy shortage scenario could lead to further problems with the uptake and use of EU funds. for projects concluded in these vulnerable sectors.

At the same time, BofA emphasizes that the current economic situation makes it much more difficult to attract private capital. Member states’ recovery plans vary greatly in terms of the proportion of direct public investment or capital transfers. Spain, Germany and Greece place more importance on public support for private investment than on direct public capital expenditure. While private sector involvement may increase the appetite for private investment through cheap credit, for example, the risk of reduced demand from the private sector is significant. The ECB’s latest review of bank lending shows that demand for capital-related loans was particularly weak last quarter. Consequently, as BofA warns, reduced appetite from the private sector could reduce the availability of Recovery Fund funds to those Member States that use those funds to attract private investment, making it harder to meet national targets.