The macroeconomic impact of the Recovery and Resilience Facility: An analysis for Italy, Spain, and Greece

The EU Recovery and Resilience Facility was launched to support post-Covid recovery while accelerating structural transformation through investment and reform. This column provides a preliminary descriptive assessment of the macroeconomic impact of the facility in Italy, Greece, and Spain, three countries with large allocations. Using simple counterfactual comparisons, it presents evidence consistent with a positive impact on real GDP, and an even stronger impact on employment and investment in the three countries. The evidence also points to an expected positive impact on potential output in the years ahead.

The debate on the macroeconomic impact  of the EU Recovery and Resilience Facility (RRF) is growing. The RRF is a major and unprecedented EU policy initiative. It was launched to support the post-Covid recovery while accelerating structural transformation through investment and reforms. As implementation has advanced, increasing attention has turned to the assessment of its macroeconomic impact. This matters not only for assessing the RRF itself, but also for informing the broader debate on the future role of EU-level instruments and funding in Europe’s economic policy framework. 

Evidence on realised impact, beyond model-based simulations, remains limited. Earlier work is largely based on model-based simulations and points to sizeable positive macroeconomic effects. European Commission and ECB simulations point to meaningful gains in EU and euro area GDP, including in Greece, Spain, and Italy (Pfeiffer et al. 2023, Bańkowski et al. 2021, 2022, 2024). Some studies model the contribution of structural reforms (Ciapanna et al. 2023, D’Andrea et al. 2024). Credit rating agencies also expect a positive impact. Preliminary analysis from the Directorate-General for Economic and Financial Affairs (ECFIN) shows that since 2020, every Fitch and DBRS Morningstar sovereign credit rating decision rationale for Spain, Greece, and Italy has positively referenced the Recovery and Resilience Facility. By contrast, empirical literature on realised impacts is still scarce.

This column presents preliminary evidence consistent with a positive realised impact of the RRF on GDP, employment, and investment in Italy, Spain, and Greece. These countries combine large RRF allocations with somewhat different plan designs. Italy’s plan, with an allocation of 9.1% of GDP, including 3.4% in grants, relies heavily on reforms, especially in justice and public administration, and places comparatively greater emphasis on youth and digitalisation. Greece’s plan, amounting to 16% of GDP, including 8.1% in grants, stands out for its large loan facility aimed at mobilising private investment with broad reforms in labour, public administration, and justice. Spain’s plan, equivalent to 6.8% of GDP, including 5.3% in grants, combines a major labour market reform (López Molina et al. 2026) with comparatively strong investment in competitiveness-enhancing measures. Overall, the analysis presented below points to a consistent pattern compatible with a positive impact of the RRF on GDP, and an even stronger impact on employment and investment across all three countries, with early signs that supply-side gains are beginning to emerge. 

The assessment is descriptive and based on two counterfactuals. This exercise does not aim to isolate a strict causal effect, as a formal structural econometric evaluation would. Instead, it compares the countries’ performance against two simple counterfactuals. The first is the average for the euro area countries with RRF allocations of less than 1.5% of GDP. The second is a linear extrapolation of countries’ pre-Covid economic trends. Both counterfactuals may err on the optimistic side for two reasons. First, the pre-Covid linear trend may incorporate part of the cyclical rebound from the previous euro area crisis. Second, the existing literature shows that the announcement of the European recovery package, together with the ECB’s Pandemic Emergency Purchase Programme, helped stabilise sovereign spreads in the three countries after the sharp widening seen in early 2020 (Bańkowski et al. 2022, Busse et al. 2026). Taken together, these considerations suggest that the true counterfactual would likely be weaker than the benchmarks used here. At the same time, some of the post-Covid strength may also reflect lagged effects of earlier structural reforms, especially in Greece, where the euro area crisis prompted particularly deep and far-reaching changes. 

Real GDP in the post-Covid period has grown more strongly in Greece, Spain, and Italy than in the control group. By 2025, real GDP was 10.8% above its 2019 level in Greece, 10.2% higher in Spain, and 6.4% higher in Italy, compared with an increase of only 5.4% in the control group (Figure 1a). Italy records the smallest increase among the three countries, but it remains notable given the country’s sluggish pre-Covid growth. When comparing with the second counterfactual, Italy’s real GDP is broadly in line with pre-Covid trends both in level and growth (Figure 1b). Spain’s real GDP remains below the level implied by a simple extrapolation of its pre-Covid trend. Even so, it returned rapidly to its pre-Covid level and growth has remained robust thereafter. Greece is performing above its pre-Covid trend, both in terms of output level and growth dynamics. By contrast, the control group shows both lower growth and a large shortfall in level relative to the pre-Covid extrapolated trend.

Figure 1a Real GDP in Italy, Spain, and Greece compared to control group (2019=100)

Figure 1b Real GDP in Italy, Spain, Greece, and control group compared to pre-Covid trend (2019=100)

Notes: The control group comprises euro area member states with total RRF allocations below 1.5% of GDP. Trends are obtained by linear interpolation over 2014–2019 and extrapolated over 2020–2025.

Labour market performance in the three countries is even more remarkable than their GDP performance. Employment growth (measured in hours worked) has been much stronger in the three countries than in the control group (Figure 2a). In 2025, hours worked were 8.1%, 7.4%, and 7.5% above their 2019 levels in Italy, Spain, and Greece, respectively, compared with an increase of only 2.6% in the control group. When comparing with the second counterfactual, Italy and Greece have moved above their pre-Covid trajectories (Figure 2b), although the latest data show some slowing in Greece. Spain’s employment level remains below that implied by a simple trend extrapolation, but it continues to grow very rapidly. As with real GDP, the control group shows both weaker growth since 2019 and a larger shortfall relative to its pre-Covid trend.

Figure 2a Hours worked in Italy, Spain, and Greece compared to control group (2019=100)

Figure 2b Hours worked in Italy, Spain, Greece, and control group compared to pre-Covid trend (2019=100)

Notes: The control group comprises euro area member states with total RRF allocations below 1.5% of GDP. Trends are obtained by linear interpolation over 2014–2019 and extrapolated over 2020–2025.

Investment is the area in which the early macroeconomic evidence is strongest. In all three countries, the post-Covid recovery has avoided a repeat of the prolonged investment weakness seen after 2008. Total investment as a share of GDP has risen in Italy, Spain, and Greece by 3.7%, 0.3%, and 5.9% of GDP, respectively, while it fell by around 2% of GDP in the control group. As a result, investment rates in Italy and Spain are now broadly in line with those in the control group, while Greece has been catching up rapidly, albeit from a low level (Figure 3, Panel A). A similar pattern is visible for private investment (Figure 3, Panel B). This is consistent with the view that RRF-supported public investment has not crowded out private investment and may instead have helped to crowd it in, including through the direct use of some RRF funding to support investment by non-financial corporations. Excluding dwellings from private investment (Figure 3, Panel C) suggests that the positive trend of private investment in Italy was not driven mainly by the Superbonus scheme.

Figure 3 Total and private investment in Italy, Spain, and Greece compared to control group (% of GDP)

Sources: AMECO, European Commission; authors’ calculations.
Notes: Investment data are in % of GDP. The control group comprises euro area member states with total RRF allocations below 1.5% of GDP. In Panel C, the total investment in dwellings (public and private) is subtracted from private investment.

The evidence points to an emerging strengthening of potential growth, albeit with some cross-country variation. The RRF is projected to strengthen productive capacity through higher capital accumulation, stronger labour supply, and improved total factor productivity (TFP), supported by reforms. The evidence to date is encouraging. In all three countries (Figure 4), capital and labour have made solid contributions to potential growth, with labour contributing especially strongly in Spain. TFP has also contributed positively in Spain and, more so, in Greece. Against this generally favourable backdrop, the main source of concern remains Italy’s TFP, which continues to weigh on potential growth. Even so, strong capital accumulation in Italy, together with the prospect of reform effects materialising with a lag, provides some grounds for cautious optimism. Figure 5 presents the European Commission’s ten-year-ahead projections for potential output for the three countries and the control group, comparing the projections based on the European Commission’s Autumn Forecast 2019 with those based on the European Commission’s Spring Forecast 2026 (European Commission 2019, 2026) . For Italy and Spain, potential output in 2025 is already estimated to be above the level projected in 2019, with further gains expected ahead, especially for Spain. At the same time, Italy’s potential output growth is projected to gradually decelerate after 2026 and grind to a near halt by 2034, also due to adverse demographic trends. For Greece, potential output in 2025 is estimated to be slightly below the 2019 projections, but the more recent projections point to stronger growth thereafter.

Figure 4 Contributions to potential growth in Italy, Spain, and Greece (% per annum)

Sources: AMECO, European Commission; authors’ calculations.
Notes: The chart shows potential output growth and the respective contributions of capital, labour, and total factor productivity (TFP). Potential output estimates are based on the European Commission’s methodology, as commonly agreed with the member states. The contributions of capital, labour, and TFP are derived from a standard growth-accounting decomposition.

Figure 5 Potential output for Italy, Spain, Greece and control group (2019=100)

Sources: AMECO, European Commission, authors’ calculations.
Notes: AF2019=Projections based on the European Commission’s Autumn Forecast 2019, published in October 2019 (European Commission 2019). SF2026=Projections based on the European Commission’s Spring Forecast 2026, published in May 2026 (European Commission 2026). Potential output data are based on the methodology commonly agreed with the member states (Havik et al. 2014).

Overall, the post-Covid performance of Italy, Spain, and Greece is consistent with a positive macroeconomic impact of the RRF. For the three countries, the impact is visible on GDP and stronger on employment and especially investment. This appears to support higher potential growth and is reflected in improved ten-year-ahead projections. The picture varies across countries. In Italy, the evidence points especially to stronger investment and capital deepening. TFP is currently a drag on potential growth, which is not entirely unexpected, as the growth impact of Italy’s Recovery and Resilience Plan reforms and investments, particularly in public administration, justice, and education, is likely to materialise only gradually. In Spain, labour makes the largest contribution to potential growth, and TFP is also improving, while investment has increased less than in Italy and Greece. In Greece, the most notable pattern is broad-based catch-up: GDP has moved above its pre-Covid trend, investment has risen sharply from a low base, and TFP contribution is strong. The challenge now is to maintain implementation momentum and preserve the reform effort so that these gains translate into lasting improvements in productivity and potential output. Future research should provide more robust econometric evidence to identify causal effects.

Source : VOXeu