Making sense of research and innovation spending through the EU’s Recovery and Resilience fund

The EU’s €723.9 billion Recovery and Resilience Facility fund (RRF), set up in 2021 to help member states recover from the social and economic impact of COVID-19, will direct huge sums of money to research and development in the coming years.

To date, a combined total of just over €44 billion is earmarked for R&D, involving 55 policy reforms and 169 investments. With a few exceptions, countries have dedicated between 4% and 13% of their allocations for research, with the average standing at about 10%.

The overarching goal of the fund is to help countries pursue the green and digital transitions, but it is up to them how they go about this – as long as plans meet certain criteria. These include dedicating at least 37% of spending to climate objectives, and 20% to digital projects.

As a result, member states have set varying levels of focus on research, development and innovation, which is tracked through the Recovery and Resilience Scoreboard. Italy, Spain and Germany plan to dedicate the most money to these sectors.

Some countries, such as Sweden and Luxembourg, have not directed any funding specifically for research and innovation, while the Widening countries that typically lag behind in the EU in climate change mitigation and digitisation, including Slovenia, Latvia and Lithuania, have chosen not to put much funding into research and innovation in these areas. Not all EU countries appear in the graph below, as their final RRF plans had not been approved when the data were published in April 2022.

Not putting money into research and innovation projects does not necessarily mean these sectors will not benefit indirectly from the COVID recovery fund. For example, Sweden has earmarked €308 million to scale up higher education institutions, which could by proxy improve research output. Romania plans to spend nearly €6 billion on improving its rail network and urban transport systems, which will promote economic development overall.

At the top of the scale, Germany plans to spend up to 26% of its €25.6 billion allocation directly on R&I activities. It is followed by Denmark, which will dedicate 20% of its €1.5 billion on research, then Finland and Spain, both dedicating 16% to research and innovation.

Of the central and eastern European countries, Slovakia is putting the largest percentage of its allocation into research, at 13% of €6.3 billion.

On the other end of the scale, Romania plans to spend just 1% of its funding on R&I. And despite the fact that Greece will put over €1.2 billion into research, this equates to only around 4% of its total allocation of €17.77 billion in grants and €12.73 billion in loans.

Member states are taking varying approaches to applying COVID recovery money to improve R&I ecosystems.

Cyprus plans to use its money to overhaul national R&I policy. Croatia is focusing on innovation and increasing investment into companies. Both Spain and Belgium have put the focus on investing in hydrogen energy, along the full supply chain from research to the market. Germany, one of the big R&I spenders, will push international initiatives in areas including hydrogen, microelectronics and cloud technologies.

As this shows, there are huge disparities in how much countries plan to use the COVID recovery fund to support research an innovation. Romania, one of the weakest member states in terms of research and innovation, is investing just €314 million into directly funding R&I activities, a figure that pales in comparison to peer countries. For example, Slovakia, also a relatively weak country for R&I, will spend close to €800 million on improving its R&I ecosystem. This notably includes reforms to its higher education system.