The European Commission adopted on Wednesday 14 April measures to ensure that borrowing under the NextGenerationEU temporary recovery instrument is financed on the most advantageous terms for EU Member States and their citizens.
The Commission will use a “diversified” funding strategy to raise up to €806 billion for the EU economy by 2026, equivalent to 5% of the Union’s GDP.
This approach, which will be in line with best practice for sovereign issuers, will allow the Commission to raise the necessary amount in a smooth and efficient manner. This will also attract investors to Europe and strengthen the international role of the euro.
The Communication (https://bit.ly/3uQHVY8 ), which details this financing strategy, states that during the 2021-2026 period, the Commission will borrow the initial amounts on behalf of the EU on the international capital markets through financing operations.
The funds raised by the EU will be repaid by the Member States either directly (for loans) or through the EU budget (for grants) by December 2058.
‘Green’ bonds. “The amount of €800 billion means that we will borrow an average of €150 billion a year” until the end of 2026, said Commissioner for Budget Johannes Hahn.
The Commissioner added that NextGenerationEU will include “a €250 billion green bond programme to reach the 30% target”.
The European Commission is working on these green bonds, and “we are confident that the Member States will also assume their responsibilities”, he said.
Questions about the timetable? Member States are currently completing the ratification phase of the Own Resources Decision (17 countries have ratified). Mr Hahn hopes that the Commission will be ready to start raising funds on the market by June. “We should be able to start issuing bonds as early as 1 July” and then in September, Hahn said. He called on EU countries to do what was necessary to meet the deadlines.
Responding to questions from the press, Mr Hahn said that: - the Commission will present a financing plan to investors and shareholders every six months, and the monthly fundraising capacity is around €20 billion; - the €45 billion needed for the 13% pre-financing could thus be raised “in two months”; - it is “very realistic” to think that the initial funds can be paid to the States whose national recovery plans were approved first “in July” (and in September for the other countries); - bonds will have a variable duration (from 3 to 30 years), but bonds with a duration of less than one year are also expected to be introduced; - with regard to the question of reimbursement, €15 billion per year from 2026 until 2058 will be required to be able to repay the Recovery Plan funds (interest and principal), and for this, the Commission will present proposals on new own resources in June (see EUROPE 12686/8).
Link to all texts of 14 April: https://bit.ly/3dfUIgI (Original version in French by Lionel Changeur)