EU Court of Auditors: Corona billions hardly measurably promoted digitization

The EU's coronavirus recovery fund ("Next Generation EU"), originally worth a total of 724 billion euros, was intended to serve as an engine for digital change in the EU. However, according to a special report published by the European Court of Auditors on Thursday, the member states and the European Commission have largely missed this opportunity. According to the report, all EU countries have provided at least 20 percent of the funds for digitalization as planned. Almost 150 billion euros have flowed into this area. However, the auditors criticize that these funds "did not always effectively advance" the digital transformation. This is because the states were not obliged to "invest primarily where there is the greatest need".

Too little targeted investment

According to the report, the investigation of the large funding pot to revive the economy after the coronavirus pandemic mainly covered the period from February 2021 to March 2024. The auditors carried out focus analyses in Denmark, France, Italy, Luxembourg and Romania and took a closer look at 27 digitalization measures there. Overall, they found that some member states had allocated a comparatively small proportion of their funds to areas such as the education or healthcare sector, where they were underperforming. This had diminished the potential of the program, known in Brussels jargon as the Recovery and Resilience Facility (ARF) to "contribute effectively to the digital transformation".

The Commission introduced the Digital Economy and Society Index (DESI) in 2014, according to the Court of Auditors. This is "a comprehensive tool to monitor the digital progress of Member States" and to identify weakening sectors. However, the ARF Regulation did not encourage Member States to prioritize investment in such areas with gaps. Italy, for example, has funded projects for the digitalization of SMEs with 480 million euros. However, the measure was already "deemed to have been satisfactorily completed" when the companies in question were selected, regardless of whether the project was ultimately implemented as planned.

Vague metrics, little cooperation

The performance indicators of the recovery fund are not at all suitable for reasonably assessing the results achieved with public funds in the area of digital transformation, the auditors criticize. The metrics used, for example for digital skills, broadband expansion and e-government services, were too general, focused primarily on undefined results and were not well aligned with the EU's current digital strategy. Furthermore, according to the report, EU countries did not use the right common indicators or report consistent or meaningful data for around 60 percent of the investment measures reviewed. As a result, the contribution of ARF-funded reforms to the digital transformation could not be accurately determined.

The treasury watchdogs also criticize the fact that there have been significant delays in implementation. In the five countries examined in detail, almost half of the milestones and targets were affected by postponements or replacements. The opportunity to carry out long-term transnational projects was also hardly used, although this could have significantly advanced digital technologies and skills in the EU.

According to the analysis, Germany wanted to invest 48% of ARF funds in digitalization projects. This is the largest share of all member states and well above the average of 26%. What exactly happened to it was not part of the study. In April 2021, the German government decided to provide 15.5 billion euros from the economic stimulus package for digitalization and climate protection. The funds were to flow into Industry 4.0, the implementation of the Digital Pact for Schools and the data strategy as well as the digital railways, which are still lagging behind. From the outset, the German Federal Audit Office had "considerable doubts about the effectiveness and efficiency" of the financial blessing from Brussels. Structural deficits would hardly be eliminated.

(vbr)