The wages of reconstruction – the EU’s new budget and the public service staff shortage crisis on the EU’s eastern periphery

Abstract

Over the next seven years, €724bn are being made available to Member States from the EU’s Recovery and Resilience Facility (RRF) as part of the Next Generation EU budget instrument. Despite being touted as a revolutionary shift in EU economic policies, the RRF in many respects builds on the logic of previous EU budget rounds. Most importantly, it follows a developmental logic aiming to facilitate territorial cohesion by allocating more funds to less developed EU countries and regions. One of the main purposes of EU budgets has long been to strengthen EU cohesion by reducing territorial inequalities. At the time of their accession in 2004 and 2007, the relative underdevelopment of Central and Eastern European (CEE) Member States qualified them for a larger share of the cohesion and regional funds. Over time, the importance of EU funds in these economies has further increased, in parallel with the shrinking of their fiscal space, in itself partly due to enhanced budgetary surveillance by the EU’s New Economic Governance regime (Bohle and Greskovits, 2019; Erne, 2018). The RRF has brought a slight readjustment to the distribution of funds across EU peripheries, with southern Member States gaining greater funding as they now have higher unemployment than eastern Member States and were more severely hit by the economic fallout of the pandemic. Even so, Central and Eastern Europe will receive large amounts of EU RRF funds. Given the continued importance of EU funds for the CEE region and the fact that it has been the main net recipient of past EU budgets, this article explores the impact of previous EU budgets on the region and whether the Recovery and Resilience Facility represents a break with earlier spending priorities. In particular, it focuses on the question of whether the balance of EU funding remains tilted towards infrastructure spending rather than spending on people (human resources). To start with, CEE countries have been successful in absorbing EU funds, meaning they have the capacity to spend a very high share of the available funds. Despite worries before their accession, the absorption capacity of the eastern EU newcomers ramped up very quickly (Medve-Bálint, 2018). This was partly a result of their upgraded bureaucratic apparatus during the accession process and of a re-orientation of their domestic budgetary priorities, as most EU projects require co-financing. While they were successful in spending this money, which areas were targeted? What did these countries spend the money on? One thing is almost certain: the influx of EU money since 1094237 TRS0010.1177/10242589221094237TransferSzabó research-article2022