Euro area: NGEU fades, EU transfers persist

Research evidence excerpt

Euro area: NGEU fades, EU transfers persist

J P M O R G A N Europe Economic Research

23 July 2026

Euro area: NGEU fades, EU

transfers persist

• The NGEU is coming to an end this year, with countries likely to accelerate Economic and Policy Research

deployment ahead of key deadlines Mariana Monteiro

• NGEU expiry to create fiscal headwind in 2027, but cliff effect should be (44mariana.reispaivamonteiro@jpmorgan.com20) 3493-5147

less steep than feared... J.P. Morgan Securities plc

• ...as residual NGEU and Cohesion funds should smooth the phase-out

The NextGenerationEU (NGEU) programme formally expires this year. Under the

Recovery and Resilience Facility (RRF), all milestones and targets must be met by

31 August 2026, and all Commission disbursements must be completed by 31

December 2026 (see here). This expiry has raised concerns about a potential “fiscal

cliff” from 3Q, compounding the national consolidation required under the EU

fiscal framework. These concerns are amplified by the likelihood of a late-cycle

acceleration in NGEU deployment as countries rush to meet the deadline, which

would exacerbate the payback later on. Risks are greatest for the largest

beneficiaries – most notably Italy and Spain.

Despite these concerns, we expect the NGEU's expiry to create a fiscal headwind

in these countries rather than an abrupt cliff. Some residual NGEU resources

should remain available beyond August, and Cohesion Policy investment is likely

to pick up, providing a partial offset. Adjusting for expected changes in NGEU-

related transfers, we project fiscal tightening of around 0.4%-pt of GDP in Italy in

2027 – broadly in line with 2026, assuming an acceleration in NGEU deployment

this year (Table 1). In Spain, the adjustment is likely to be more pronounced, at