On Tuesday 19 January, the European Finance Ministers will take stock of the implementation of the Recovery and Resilience Facility, the budgetary instrument at the heart of the Next Generation EU Recovery Plan.
This dossier is at the top of the economic and financial priorities of the Portuguese Presidency of the Council of the EU in the first half of 2021 (see EUROPE 12632/22). “Our objective is very simple: to create all the conditions so that later, in the second part of the Presidency, the EU Council can evaluate the national plans”, said a European source on Wednesday 13 January.
According to the text establishing the Facility that was the subject of an Interinstitutional Agreement (see EUROPE 12626/1), Member States have until 30 April to prepare and send their national recovery plans to the European Commission, which will have a maximum of two months to assess them before proposing their adoption by the EU Council, by a qualified majority of Member States.
NPLs. To ensure that the EU27 are ready as quickly as possible to deal with the resurgence of non-performing loans(NPLs) caused by the Covid-19 pandemic, the Commission presented a specific action plan in December, aimed in particular at stimulating secondary markets for NPLs and supporting Member States in the possible creation of bad banks (see EUROPE12624/5, 12622/21).
Ministers will be invited to express their views on how to facilitate lending to the economy by credit institutions while ensuring that they are sufficiently capitalised to absorb NPL stocks. They will be asked to prioritise the measures put forward by the Commission.
In a document that will serve as a basis for these discussions, the Portuguese Presidency of the EU Council states that bad debts will increase “mainly due to pressure on cash flow” as a result of severe lockdown measures, rather than due to a poor loan issuing policy. This situation “risks affecting banks’ balance sheets, slowing credit growth and delaying the economic recovery”, it adds, basing itself on an ECB estimate that “in a severe scenario, bad loans in the euro area could reach 1,400 billion euros”.
It is also recalled that, in the context of the European Recovery Plan, Member States may provide for the reform of their national insolvency frameworks, a measure that could reduce the stock of NPLs.
Earlier this week, the European Parliament’s Committee on Economic and Monetary Affairs adopted its negotiating position on secondary markets for NPLs (see EUROPE 12633/18, 12634/25).
See the Portuguese preparatory document: http://bit.ly/39wzKqS
European Semester. Ministers are also expected to activate the procedure for the adoption of the socio-economic policy recommendation at the euro area level in 2021.
As the rules of the Stability and Growth Pact are also frozen in 2021 to cope with urgent spending to fight the pandemic and support the economy, the recommendation calls for maintaining expansive fiscal policies for this year, while bearing in mind the importance of sustainable public debt in the medium term.
See the recommendation for the euro area: https://bit.ly/3oKoLR0
EIB. Lastly, the European Investment Bank will present the ministers with a survey on investment prospects. (Original version in French by Mathieu Bion)