The EU’s post-coronavirus ‘Union Recovery Programme’ would allow the EU to raise €323 billion on the financial markets with a long maturity, confirms a European Commission note on the new 2021-2027 Multiannual Financial Framework (MFF) as seen by EUROPE on Friday 24 April (see EUROPE 12473/2).
While Eric Mamer, spokesman for the European institution, spoke of concrete legislative proposals for “mid-May”, the Vice-President of the Commission, Valdis Dombrovskis, announced an initiative as early as “6 May”.
The own resources and the architecture of the MFF would be “adapted” to ensure the ability of the EU budget to reimburse obligations. The funds would be used as ‘assigned revenue’ to reinforce existing spending programmes and to finance new mechanisms.
Grants and loans. Based on Article 122(1) of the TFEU, an instrument would empower the Commission to raise funds on the markets to finance reaffirmed political priorities, either in the form of grants or loans, the document says. This subject divides the Member States, as loans are added to countries’ debts.
French President Emmanuel Macron said on 23 April that he wants “budgetary transfers”, via this stimulus fund or the EU budget, thanks to a “common guarantee”. These funds could be transferred via the budget to particularly affected regions or sectors. “There is no consensus on this today”, he acknowledged.
Thanks to its triple-A financial rating, the EU can raise funds at favourable market conditions.
In order to have the fiscal capacity to undertake this fund-raising, the EU would raise the own resources ceiling “well above the current level of 1.20% of EU gross national income”, according to the note.
The Commission is reportedly considering: – a temporary increase (+0.5% in brackets) in the ceiling of existing own resources, due to the exceptional needs related to the EU Recovery Programme which are expected to be available as of 2020. This proposal requires a unanimous decision of the European Council, national ratifications before the end of the year and a declaration by the EU-27 providing an appropriate guarantee and making funds available without delay in 2021; – a permanent increase in own resources beyond the ceiling of 1.29% of EU gross national income proposed in May 2018. The figure of 2% has already been mentioned.
The funds allocated to the Reform Support Programme, in line with the future budget of the euro area, would be increased to €200 billion and raised on the market.
Moreover, in addition to grant aid, the programme would have a new ‘loan facility’ for the Member States most affected by the crisis. Loans and grants would be conditional on the implementation of reforms and investment measures to support growth.
The size and scope of the InvestEU instrument will be increased well beyond the current proposal.
It should be noted that the Common Agricultural Policy (CAP) is not mentioned anywhere in the document, even though a crisis is looming (see EUROPE 12473/10).
A “reinvigorated” cohesion policy
The Commission is reportedly currently considering a transitional solution for cohesion policy, contrary to what European Commission Vice-President Valdis Dombrovskis (see EUROPE 12470/4) might have suggested.
Thus, the Common Provisions Regulation for the 2014-2020 period and the current programmes would be extended by 2 years until 2022. Added to this is the flexibility provided through the two legislative packages CRII and CRII+ of the Coronavirus Investment Initiative, with its 100% cofinancing rate (see EUROPE 12460/3). Also mentioned is the development of a special distribution key to better tailor financial allocations to needs.
However, it should be noted that only crisis-related measures (such as State Aid to SMEs, income support measures and the restoration of healthcare systems) will be financed by €50 billion from the earmarked external revenue of the EU Recovery Programme. This amount of €50 billion is still under discussion.
On the next MFF, the Commission wants to “reinvigorate” cohesion policy, in order to strengthen support for investment in “key” economic sectors (without defining which ones) affected or highlighted by the crisis.
As such, the Common Provisions Regulations (CPR) for the 2021-2027 MFF would be revised, according to the document. The Commission foresees the introduction of certain flexibilities: – an increase in the flexibility to transfer between funds from 10 to 15%; – emergency response provisions which would allow the “to temporarily deviate from some rules in favour of som or all” Member States.
In addition, the European institution wants to increase investment in the health sector. It aims to facilitate a rapid start of the Just Transition Fund, the Fisheries Fund and the National Funds, whose implementing provisions are anchored in the new CPR Regulation.
If confirmed, these lines of thought, particularly the transitional solution between the two budget cycles, are good news, a cohesion expert said, because they would be based on “new money”.
A new distribution key also seems to be a good option, according to our source. She would welcome a distribution key based on a projection of declining GDP per capita for the year 2020 and on health-related criteria.
See the considerations for the post-2020 MFF: https://bit.ly/350tt3U
See note on the Recovery Fund: https://bit.ly/2SkIubZ (Original version in French by Lionel Changeur, Pascal Hansens and Hermine Donceel)