Why Italy’s NRRP Is Better Than It Looks

The paper by Tito Boeri and Roberto Perotti offers a sharp and thoughtful critique of the Italian National Recovery and Resilience Plan (NRRP), the largest national component of the European Union’s Next Generation EU programme.  

Their analysis is valuable because it highlights a number of real weaknesses in the design and implementation of the plan: the excessive scale of the programme, the overestimation of administrative capacity, the setting of unrealistic targets, and the risk that the milestone-and-target framework encourages formal compliance rather than substantive change.  

Many of these criticisms are reasonable and deserve to be taken seriously. Yet, on closer inspection, each of them also admits a more balanced interpretation.  

In several cases the same features that appear as weaknesses can also be interpreted as sources of institutional innovation or structural improvement.  

Moreover, the extraordinary circumstances in which the NRRP was designed – during the COVID-19 pandemic – make it difficult to evaluate the programme using the standards that would normally apply to a long-prepared public investment strategy.  

The central point of this commentary is therefore simple: while the criticisms raised by Boeri and Perotti are legitimate, the NRRP should not be evaluated solely through its shortcomings.  

The programme also produced important institutional and structural advances that will likely shape Italian public policy and European economic governance for years to come. 

The scale of the NRRP and the decision to take all available funds 

One of the main criticisms raised by Boeri and Perotti concerns the scale of the Italian plan.  

Italy decided to request not only the grants made available through Next Generation EU but also the full amount of loans it could obtain.  

According to the authors, this choice created an excessively large programme that the Italian administration was not capable of managing effectively. There is some truth to this observation.  

The Italian NRRP is indeed extraordinarily large: around €192 billion, roughly 10 percent of GDP. Implementing such a programme within a few years inevitably creates enormous administrative pressures.  

However, the criticism overlooks the political and historical context in which the decision was made.  

For more than a decade before the pandemic, Italy had been among the countries advocating the creation of common European fiscal instruments: common borrowing, common investment programmes and some form of fiscal capacity at the European level. 

These proposals had repeatedly encountered resistance from several northern European countries.  

The COVID-19 pandemic unexpectedly broke this political deadlock. In 2020 the European Union decided to issue common debt on a massive scale to finance recovery programmes across member states.  

For countries like Italy that had long advocated this solution, the creation of the Recovery Fund represented a historic turning point in European integration. In that context it would have been politically unrealistic for Italy to decline part of the available resources.  

After insisting for years on the need for common borrowing and common investment, it would have been difficult to explain to domestic public opinion or to European partners why the country was now choosing not to make full use of the new instrument.  

Moreover, the financial conditions attached to the loans were extremely favourable. When the plan was designed in 2020 and 2021, interest rates were historically low. The loans were structured as long-maturity bonds, often up to thirty years, with a substantial grace period before repayments begin.  

Under those conditions, the cost of borrowing was significantly lower than what Italy would have faced on financial markets.  

From a purely financial perspective, therefore, the opportunity was extremely attractive.  

It is difficult to imagine any government voluntarily renouncing such a large amount of long-term financing under those conditions. 

The question of unrealistic targets 

Boeri and Perotti also argue that many of the targets included in the NRRP were unrealistic and had to be revised downward during implementation. This is undoubtedly true.  

In several sectors – justice, early childhood services, student housing – targets were adjusted during the life of the programme. However, it is important to recall that the plan was designed during one of the most uncertain periods in recent economic history.  

The initial NRRP was prepared in 2020–2021, when Europe was still facing the peak of the COVID-19 crisis. Governments were operating under enormous pressure to respond quickly to an unprecedented economic shock.  

In that context, the objective was not to design a perfect long-term investment strategy but to launch a large recovery programme capable of sustaining economic activity and employment during the pandemic.  

Under such circumstances, it is hardly surprising that some targets were overly ambitious. What matters more is how the programme evolved afterwards. 

A more relevant question is therefore not why the initial targets were ambitious, but why subsequent revisions of the NRRP did not fundamentally redesign certain programmes that had been conceived under pandemic conditions.  

For instance, programmes such as GOL (the active labour market policy reform), tourism investments, and several sectoral initiatives were largely designed in the early phase of the pandemic.  

When the plan was revised in later years, one might have expected a deeper reconsideration of these measures in light of changing economic conditions. Instead, the revisions often focused on introducing new initiatives rather than fundamentally redesigning existing ones. It look like that many of the problems were caused by the failure to revise efficiently the Plan and adapt it to the changing scenarios. 

A good example is the introduction of the “Industry 5.0” programme, which aimed to combine digital transformation and energy efficiency incentives for firms.  

In practice, this initiative encountered serious implementation difficulties and was widely regarded as one of the least successful components of the revised NRRP.  

More recently, further revisions have been delayed by disagreements over initiatives such as the proposed platform for joint railway equipment procurement (ROSCO).  

These difficulties illustrate that the problem was not simply the initial design of the NRRP, but also the political and administrative complexity of revising such a large programme once it was already under implementation. 

The milestone-and-target approach 

Another criticism raised by Boeri and Perotti concerns the governance structure of the NRRP. The programme relies on a performance-based system in which funds are disbursed only after countries achieve specific milestones and targets.  

According to the authors, this system can create incentives for formal compliance rather than substantive improvements. Governments may focus on meeting numerical targets rather than on achieving meaningful policy outcomes. This concern is understandable.  

Any performance-based framework carries the risk that actors will attempt to manipulate indicators or redefine targets. However, it is also important to recognise the significant institutional innovation introduced by this system.  

Traditionally, European structural funds have operated through a reimbursement model: governments spend money on eligible projects and later request reimbursement from the European Commission. In practice this approach often emphasises financial compliance rather than results.  

The NRRP introduced a fundamentally different model. Instead of reimbursing expenditures, the European Union disburses funds only when countries demonstrate that they have achieved agreed policy milestones or investment targets.  

While imperfect, this system has already changed the behaviour of public administrations in several ways.  

First, it has forced governments to develop more detailed planning frameworks. Ministries and implementing agencies have had to define specific objectives and timelines for each component of the programme.  

Second, it has strengthened monitoring and reporting mechanisms. The need to demonstrate progress toward milestones has led to the creation of new monitoring systems and databases that track the implementation of projects.  

Third, it has increased coordination between national and European institutions. The negotiation of milestones and targets requires continuous interaction between national administrations and the European Commission.  

For these reasons, virtually all administrations involved in implementing the NRRP agree that the milestone-and-target framework represents an improvement compared with traditional funding mechanisms.  

The European Commission itself is now considering extending similar performance-based approaches to other parts of the EU budget, as it results from the official proposal for the next budget 2028-2034. 

Thus, while the system certainly carries risks of formalism, it has also introduced a much stronger culture of planning, monitoring and accountability within public administration. 

Early childhood services: more progress than it may appear 

One of the most critical sections of the Boeri–Perotti report concerns early childhood services, particularly the programme to expand nursery places for children aged zero to three.  

The authors correctly point out that the original target of creating more than 260,000 new places was unrealistic and had to be revised downward. They also highlight the difficulties faced by municipalities in implementing new projects, partly because of concerns about future operating costs.  

These criticisms are valid. Nevertheless, focusing exclusively on the initial targets risks overlooking the structural improvements that the programme is already generating.  

Although the studies by Andrea Gavosto and the Fondazione Agnelli rightly point to the fact that the PNRR investment did not closed the North-South gap, the results obtained so far suggest that the NRRP investments in early childhood services represent one of the most significant structural changes in Italian social infrastructure in decades.  

Italy has historically had one of the lowest levels of nursery coverage in Europe, with particularly large disparities between northern and southern regions. Expanding access to early childhood education has long been considered essential both for child development and for increasing female labour force participation.  

The NRRP has mobilised unprecedented resources for this sector, financing the construction or renovation of thousands of facilities across the country.  

Even if the final number of new places ends up below the initial target, the programme is likely to produce a substantial increase in coverage (150 thousand more children covered instead of the 164 thousands of the initial target).  

Equally important, the programme has triggered a large wave of investment in local social infrastructure that would probably not have occurred otherwise. 

School infrastructure and full-time education 

A similar argument applies to investments in the school system. Boeri and Perotti correctly note that some reforms – particularly those concerning teacher recruitment and career progression – have been implemented only partially.  

This is an area where Italy still faces significant structural challenges. However, the investment components of the education package are already producing visible improvements in school infrastructure.  

NRRP resources have financed new school buildings, renovations, energy efficiency upgrades, and the construction of facilities such as canteens and sports halls.  

These investments are particularly important because they support the expansion of full-time schooling.  

In many parts of Italy – especially in the South – schools traditionally operate only in the morning, partly because facilities such as canteens or sports spaces are missing. By financing these infrastructures, the NRRP makes it easier for schools to offer full-day programmes.  

This has important implications not only for educational outcomes but also for social equality and for the participation of parents, especially mothers, in the labour market. 

Universities and research networks 

Another area where the NRRP has produced positive effects concerns universities and research. The programme has funded new research centres and networks involving universities, research institutes and private firms.  

These initiatives aim to strengthen collaboration between academia and industry and to promote technological innovation. Many of these centres bring together large groups of affiliated researchers from different institutions.  

While their long-term effectiveness remains to be evaluated (for example in terms of new patents), they represent an important attempt to overcome the fragmentation that has historically characterised the Italian research system.  

For this reason, several observers argue that these networks should be preserved and strengthened even after the end of the NRRP. 

Public procurement and administrative capacity 

The NRRP has also had a significant impact on public procurement procedures. Italy has traditionally suffered from complex and slow procurement processes, partly due to overlapping regulations and limited administrative capacity in many local authorities.  

The implementation of the NRRP has forced administrations to modernise procurement practices in several ways.  

First, digital procurement platforms have become more widely used, allowing contracting authorities to manage tenders more efficiently.  

Second, new forms of centralised procurement and technical support have been introduced to assist smaller municipalities that lack specialised expertise.  

Third, the intense monitoring associated with NRRP projects has increased transparency and accountability in procurement processes.  

While problems certainly remain, many administrations report that procurement procedures now operate more efficiently than before the NRRP. 

Active labour market policies and the GOL programme 

Boeri and Perotti are also critical of the GOL programme, the largest labour-market reform financed by the NRRP. Their criticism focuses on the fact that the programme’s headline indicator – the number of beneficiaries “taken in charge” – does not necessarily correspond to meaningful interventions.  

This observation is partly correct. Being registered in a programme does not automatically translate into training or employment outcomes.  

However, focusing solely on this indicator overlooks the institutional changes that GOL has introduced. The programme represents the first large-scale attempt to build a national system of active labour market policies in Italy.  

Historically, employment services in the country have been fragmented and under-resourced, with large differences between regions. GOL has introduced a common national framework for the profiling of jobseekers and the provision of services. It has also strengthened coordination between public employment services and regional training systems.  

Moreover, the programme has significantly expanded the number of individuals participating in training programmes, including digital skills training. Even if the employment effects of these interventions will need to be evaluated over time, the institutional infrastructure created by the programme represents an important step forward. 

A broader perspective on the NRRP 

Taken together, these examples illustrate why it would be misleading to evaluate the NRRP solely in terms of its shortcomings. The programme certainly faces serious challenges. Some targets were overly ambitious, some projects have been delayed, and some reforms have been implemented only partially, (also because the Meloni government openly refused to carry them forward and the EU commission was particularly lenient).  

Yet the NRRP has also generated profound changes in the way public policies are designed and implemented in Italy. It has mobilised unprecedented levels of investment in infrastructure, social services, education and innovation.  

It has introduced new governance mechanisms based on measurable objectives and continuous monitoring. And it has strengthened cooperation between national administrations and European institutions.  

Perhaps most importantly, it has demonstrated that the European Union can successfully issue common debt and finance large investment programmes across member states. 

Looking forward 

The NRRP should therefore be seen not as a perfect policy instrument but as an extraordinary experiment in European economic governance. Its limitations should certainly be recognised and analysed. At the same time, its achievements should not be dismissed. 

 The challenge for policymakers in the coming years will be to identify which elements of the programme should be preserved and strengthened.  

Some investments – such as those in early childhood services, school infrastructure and research networks – are likely to have lasting benefits and should be continued. Similarly, the governance innovations introduced by the milestone-and-target framework may provide useful lessons for future European programmes. 

The Next Generation EU programme and the Italian NRRP represent one of the most ambitious economic policy initiatives in the history of the European Union. 

Boeri and Perotti are right to highlight the risks associated with such a large and rapidly designed programme. Their critique draws attention to real problems in planning, implementation and evaluation.  

But focusing exclusively on these shortcomings risks overlooking the broader significance of the programme.  

The NRRP has been an extraordinary policy experiment – one that has pushed both Italy and the European Union to innovate in areas ranging from fiscal policy to public administration.  

Rather than discarding the experience because of its imperfections, policymakers should focus on learning from it. The goal should be to preserve and strengthen the most successful components of the programme while correcting its weaknesses.  

In other words, the NRRP should not be judged as a failure simply because it did not meet every initial expectation.  

Instead, it should be recognised as the first step toward a new model of common European investment. Acknowledging its limits is necessary. But doing so should not lead us to throw the baby out with the bathwater. 

This commentary is part of a broader discussion offering an initial assessment of the impact and policy implications of the Next Generation EU programme as it nears completion. The conversation was opened by a Policy Brief by Tito Boeri and Roberto Perotti, An Evaluation of the Italian National Recovery and Resilience Plan.