The Diplomat
The European Commission yesterday adopted new measures to ensure that borrowing under the Next Generation EU recovery instrument “will be financed on the most advantageous terms for EU Member States and their citizens”.
As reported by the EU executive, the Commission will use a diversified funding strategy to raise up to around €800 billion in current prices until 2026. This approach, “in line with the best practices of sovereign issuers”, will allow the Commission to “raise the needed volumes in a smooth and efficient way” and will help attract investors to Europe and strengthen “the international role of the euro”, it said.
Next Generation EU, which forms the core of the EU’s response to the coronavirus pandemic, will be financed by borrowing on the capital markets. The Commission is therefore aiming to raise up to €800 billion by the end of 2026 through a borrowing volume of approximately €150 billion per year, “which will make the EU one of the largest issuers in euros”. All borrowing will be repaid by 2058.
“While the Commission has been borrowing before – to support EU Member States and third countries – the volumes, frequency and complexity of the Next Generation EU borrowing have called for a fundamental change in the approach to capital markets”, it continued. To this end, the diversified funding strategy will combine “the use of different funding instruments and funding techniques with an open and transparent communication to the market participants” and will enable the Commission to “mobilise all funds when required on the most advantageous terms for EU Member States and their citizens”, it continued.
“Today, we are unveiling the engine that will pump the fuel to power Next Generation EU”, European Commissioner for Budget and Administration Johannes Hahn told a press conference. “The funding strategy will operationalise the NextGenerationEU borrowing, so we will have all necessary tools in place to kick-start the social and economic recovery and promote our green, digital and resilient growth”, he continued. “The message is clear: as soon as the Commission has been legally enabled to borrow, we are ready to get going!”, he concluded.
The Next Generation EU recovery instrument is endowed with €750 billion, €390 billion through transfers and the remaining €360 billion through loans. Spain will receive approximately €140 billion from Next Generation EU in transfers and loans in the period 2021-2026. The Recovery, Transformation and Resilience Plan of Pedro Sánchez’s Government, to be submitted this April to the European Commission, will be financed until 2023 with the approximately 72 billion euros corresponding to transfers, after which the Executive will request the part corresponding to loans until 2026.
