The European Commission has approved a partial disbursement of money under the second payment request through Romania’s National Recovery and Resilience Plan (PNRR), which will transfer more than €2.6 billion in the autumn. However, two of the benchmarks are considered unfulfilled, so the payment of EUR 53 million has been suspended.

The European Commission announced on Tuesday that it has approved a preliminary positive assessment of some of the benchmarks and targets related to Romania’s second payment request under the Recovery and Resilience Mechanism (RMR).

From the second tranche, Romania will receive more than 2.6 billion euros

On 16 December 2022, Romania submitted a payment request to the Commission based on the 49 milestones and two targets set for the second payment through the PNRR.

• “After examining the evidence provided by the Romanian authorities, the Commission has decided that 47 milestones and two targets out of a total of 49 milestones and two targets have been satisfactorily achieved,” the European Commission said.

According to the European institution, the milestones achieved by Romania include green and digital transition reforms, as well as reforms and investments related to improving government coordination to implement public policies, improving water management, supporting tourism and promoting culture. Other reforms and investments are aimed at improving human resource management in the health sector, strengthening fiscal administration and sustainability of the pension system, modernizing education infrastructure, ensuring the independence of the judiciary and strengthening the fight against corruption. The payment request also covers reforms to improve road safety and investments to financially support the private sector.

The value of Payment Request No. 2, including the 13% of pre-financing already paid, is €3.22 billion, of which €2.14 billion is the grant component (non-reimbursable funds) and €1.08 billion is the loan component component. If 13% of the advance is deducted, then the second tranche amounts to 2.8 billion euros, of which 1.86 billion euros is a grant and 0.94 billion euros is a loan.

In practice, it is expected that in September 2023, the executive power of the community will pay Romania 1.86 billion euros in the form of non-refundable funds (grant).

Undoubtedly, in September 2023, Romania will receive more than 2.6 billion euros from the PNRR, of which 1.86 billion euros are non-refundable and 0.8 billion euros are loans.

From September 2023, the Government will have another 6 months to convince the EC to approve the two outstanding stages. Otherwise, Romania will lose this part of the loan.

“We call on Romania to step up its efforts over the next six months”

• “Romania has made significant progress in implementing its recovery and resilience plan, for example through reforms in road safety, renewable energy and public sector cloud services.
• Romania has also taken important steps to combat undeclared work and invest in 5G networks.
• We now encourage Romania to accelerate its efforts over the next six months on the two phases of energy investment that have not yet been completed.
• We call on all Member States, including Romania, to move swiftly to implement their recovery and resilience plans. The Commission is with you,” said the statement of the President of the European Commission, Ursula von der Leyen, sent to the EC.

Romania did not meet the main milestones, which led to the suspension of the payment of €53 million

The Commission found that two benchmarks related to energy investment (specifically benchmarks 129 and 133) were not satisfactorily achieved.

• “The Commission recognizes the first steps that Romania has already taken to achieve these important milestones, although much remains to be done. Therefore, the Commission activates the suspension of payments procedure in accordance with Article 24(6) of the Regulation of the Recovery and Resilience Mechanism.
• (…) This procedure gives Member States additional time to achieve unplanned milestones, while allowing them to benefit from a partial payment related to milestones and targets that have been satisfactorily achieved,” the European Commission notes.

Who is responsible for not achieving both milestones

According to the Ministry of European Investments and Projects (MIPE), the Ministry of Energy was responsible for the implementation of both phases.

In April, MIPE explained that in order to fulfill stage 129 – the signing of contracts for the construction of new electrolyzers with a capacity of at least 100 MW, Romania had to complete the following procedures:

• 1. Receiving commitment letters from all beneficiaries with whom financial contracts were signed;
• 2. Redistribution from the PNRR or allocation from the state budget of the budget necessary for concluding financing contracts with 2 potential beneficiaries that no longer fit into the budget of the green hydrogen production competition;
• 3. Conclusion of financial contracts (with the presence of binding letters of wishes) and with 2 potential beneficiaries who no longer fit into the budget of the competition for the production of green hydrogen;
• 4. Conducting a control audit by the Auditing Body and resolving any new or unresolved findings by the Ministry of Energy;
• 5. MIPE’s transfer to the European Commission of information and data related to the implementation of the European Commission’s observations.

In addition, for stage 133, the signing of contracts for high-efficiency gas-fired cogeneration and central heating projects, the Romanian side has committed to the following procedures:

• 1. Receiving commitment letters from all beneficiaries with whom financial contracts were signed,
• 2. Confirmation of the existence of land free from encumbrances for the implementation of the CHP project in accordance with the financial contract concluded between the Ministry of Energy and the City Hall of Constanta;
• 3. Conclusion of a financial contract (with exact observance of the provisions of the Applicant’s Guide) with the City Hall of Craiova;
• 4. Conducting a control audit by the Auditing Body and resolving any new or unresolved findings by the Ministry of Energy;
• 5. MIPE’s transfer to the European Commission of information and data related to the implementation of the European Commission’s observations.

What’s next

According to Article 24(6) of the Regulation on the Recovery and Resilience Mechanism, positive ex ante assessment and suspension of payments are two different procedures with different stages.

Regarding the preliminary positive assessment: The Commission sent the Economic and Financial Committee (CEF) its preliminary positive assessment of Romania’s implementation of the milestones and targets, asking for its opinion. The CEF’s opinion, which must be issued within four weeks, must be taken into account in the Commission’s final assessment.

Following CEF’s conclusion on the positive preliminary assessment and Romania’s comments on the suspension of payments and taking into account these two elements, the Commission will decide on the payment of the tranche, in accordance with the verification procedure, through the comitology committee. The payment to Romania can be made after the Commission’s decision.

Regarding the suspension of payments, the Commission says it has informed Romania of the reasons why it considers that the two benchmarks have not been satisfactorily achieved. This notification initiates an administrative procedure between the Commission and the Member State concerned.

Romania now has the right to submit its observations to the Commission within one month of receiving the notification. If, following Romania’s observations, the Commission confirms its assessment that the two outstanding milestones have not been satisfactorily achieved, it will determine the amount of payment to be suspended, applying its suspension of payment methodology.

Romania will have six months from now to satisfactorily complete the milestones. During this six-month period, the Commission will conduct an active dialogue with the Romanian authorities. If and when milestones are achieved,

The commission will lift the payment suspension and send its assessment to the Economic and Financial Committee following the procedure described above for a positive preliminary assessment.

The commission also says it will assess requests for additional payments from Romania against milestones and targets, reflecting progress in implementing investments and reforms.

Romania’s Recovery and Resilience Plan includes investment measures and reforms grouped under 15 thematic components. The plan is supported by more than €29 billion in grants and loans, of which 13% (€3.7 billion) was disbursed to Romania in pre-financing in December 2021 (€1.8 billion in grant pre-financing) and in January 2022 (1 .9 billion euros in the form of preliminary financing at the expense of loans). On October 27, 2022, Romania received the first tranche of EUR 2.6 billion (EUR 1.8 billion in grants and EUR 0.8 billion in loans), excluding pre-financing.

Payments under the MRR are performance-based and depend on whether member countries implement the investments and reforms outlined in their recovery and resilience plans.