The writer is a senior fellow at Harvard Kennedy School

With Covid cases rising, is Europe’s economic rebound a mirage? Surging case rates, spurred by the Delta variant, suggest that opening economies and the return of tourists to Mediterranean beaches may not yet signal a turn in the pandemic. Those who believe Europe is on the upswing, however, say rising vaccination rates will make a difference. And they note fiscal help, in the form of the Recovery and Resilience Fund, is on its way.

But the RRF funds will probably help less than analysts are forecasting. In fact, they may be more than EU countries can put to practical use.

The biggest piece of the Next Generation EU programme, the RRF will make available €672.5bn in grants and loans, funded by common EU debt issuance. As a positive, that’s something northern European countries have previously refused to do, even during the sovereign debt crisis a decade ago.

To get RRF funds, member states must submit recovery plans to the European Commission for approval. They must allocate 37 per cent of resources to climate change and at least 20 per cent to digitalisation, social inclusion, education and healthcare. They must also incorporate the commission’s country-specific recommendations, in most cases structural reforms that governments have avoided for years.

Both the investment and the reform side give cause for concern. There is a precedent for countries receiving and spending EU money — the so-called structural funds that form part of the bloc’s regular seven-year budgets. But with many EU countries the precedent is not encouraging. From 2014 to 2020, the EU27 on average spent just under 50 per cent of the structural funds. Towards the bottom of the table were Spain and Italy, which absorbed about 35 per cent and 39 per cent, respectively. Yet they will receive the largest chunk of the RRF in absolute terms.

On top of the new RRF money this year, EU countries will have to absorb the remaining funds from the 2014-20 budget and those for 2021-27. That may end up like watching Tropical Storm Elsa flood my patio last week. The drain wasn’t working well enough to sop up all the water.

Still, there are some reasons for optimism about absorption of the RRF money. Structural funds require co-financing from EU countries, which isn’t always available. Furthermore, many of these funds are administered by local government officials who don’t have good projects lined up. The RRF will be administered largely by national officials, and most EU countries have dedicated teams to draw up plans and implement them. One can hope they have chosen worthwhile projects that they are confident they can execute.

However, mismanagement and red tape often hamper the efficient use of EU funds. This may remain an issue in some southern and eastern EU states. Unlike structural funds, which have a grace period, the RRF expires at the end of 2026. Reviews are held biannually and new money is only released if progress is being made. Delays are possible, and that means the overall envelope for the recovery fund will shrink.

There are also reasons to worry proposed reforms won’t be implemented. Many country-specific recommendations are about tackling the pandemic, which most EU governments are doing anyhow. But some plans in weaker EU countries include steps to reduce barriers to investment, improve the ease of doing business, reform the judicial system and improve public administration. This is hardly the first time governments have been urged to implement structural reforms in exchange for EU help. The same happened during the eurozone crisis, with mixed results.

If structural reforms were easy, governments would have implemented them already. Now they must do so while political polarisation is high and market pressure is low, thanks to the European Central Bank. We learnt in the eurozone crisis that the governance of structural reforms is difficult. Countries must not only legislate reforms but implement them too. Some governments may choose to skirt politically costly reforms in favour of pursuing short-term electoral objectives.

Yet if EU countries do not make a success of the RRF, the costs will be high. They will miss the opportunity to boost potential growth, move to a post-carbon economy and improve digitalisation. Above all, they will confirm northern European fears that commonly issued debt will disappear into the black holes of weaker EU economies. This would take mutualised debt off the table next time there is a crisis. Given the unfinished architecture of the eurozone, a crisis is sure to come one day — the only question is when.