The European Commission announced on Wednesday October 21 that it had issued a first social loan of €17 billion the day before as part of the SURE instrument, which aims to support national short-time working systems in the face of the Covid-19 pandemic.
“Yesterday was an important day because we took another step towards bringing the funds from these instruments closer to the people who need them”, said EU Budget Commissioner Johannes Hahn. The bond was oversubscribed more than 13 times, “which is a sign of the market’s great interest and confidence in the EU as an issuer”, he added, underlining the AAA financial rating the EU enjoys.
The operation consisted of the issue of two bonds: €10 billion was to be redeemed in October 2030 (10-year maturity) and €7 billion in 2040 (20-year maturity).
Interest rates on these securities are higher than what is available on the market, but are still very low or even negative. According to Reuters, the 10-year bond would have a yield of -0.238% and the 20-year bond would have a yield of 0.131%.
One source welcomed the Commission’s choice of social loans, which has made it possible to attract investors with more philanthropic profiles.
The total provisional borrowing volume planned for 2020 is around €30 billion, explained the Commissioner, for whom, by mid-2021, the Commission should be in a position to carry out the first issue of securities on behalf of the EU-27 under the Next Generation EU Action Plan.
“Thus, we will issue more than €900 billion of bonds over the period to the end of 2026, with the bulk of the issue heavily concentrated in the period 2021-2024. This is the highest amount ever borrowed in the history of the EU!” the Commissioner said.
Another source explained that no other supranational organisation currently borrows as much as the Union. “What we did yesterday and what we’re going to do is going to break many records”, she considered.
Replying to EUROPE on the possible need to resize the SURE instrument, in view of the evolution of the pandemic in Europe, Mr Hahn recalled that, in the Commission’s initial draft, the institution had already anticipated a certain continuity of the pandemic. In his view, the main challenge is the implementation of the instrument by the Member States.
So far, 17 Member States have applied for the instrument, allocating almost €90 billion of the 100 planned to be raised (see EUROPE 12576/32). (Original version in French by Pascal Hansens)