The EC plans to issue bonds to finance the recovery after the pandemic

The European Commission (EC) plans to issue debt with the backing of the Community budget to finance the post-pandemic recovery fund of the European Union, of which 80% will go to support member states and up to 15% to facilitate private investment , according to sources from the institution.

The Community Executive, which will present its proposal on May 27, has not yet revealed the volume of the fund, for which it has considered figures of around one and a half billion euros.

The Commission's plans are to raise the spending ceiling of the European budget to 2% of the EU's joint Gross National Income (GNI), compared to 1.2% today, and use this margin as support to issue bonds in the markets.

The financing obtained would then be channeled through the programs of the Community budget, a well-known instrument, trusted by all States, and which is subject to parliamentary scrutiny, as the President of the EC, Ursula von der, already advanced in April They read.

This system would also avoid that the States have to increase their contributions to the community coffers for the period 2021-2027.

This type of bond issue by the Commission is not equivalent to the Eurobonds or Coronabonds that some countries, including Spain, were claiming in principle, and, according to community sources, already has the backing of almost all the Member States.

There is less consensus on what part of the funds should be disbursed in the form of grants and what part in loans that, in any case, will be long-term, indicate the aforementioned sources.

Spain, Italy, France, Greece or Portugal, among other countries, as well as the European Parliament, demand that most of the money be granted in the form of transfers, while the Netherlands, Austria or the Nordics defend that it be done with credits.

Commission sources recall that, in both cases, the aid will have a cost since it will have to pay the costs of the debt that is issued.

To make these reimbursements, Brussels will propose to create new own resources that go directly to the European budget, so that the States do not have to increase their national contributions.

In any case, the sources indicate, there is still work to be done to convince the States, each of which has the right of veto, with which it is not possible to say whether an agreement will be reached in June.

The Community Executive plans to structure the recovery fund into three pillars.

The first will be an instrument for resilience and recovery, which will capture 80% of the funds and will be used to help countries modernize their economies, paying particular attention to digitization and the ecological transition.

This pillar will also include an additional item of cohesion funds that will be distributed among the countries taking into account criteria linked to the severity of the impact of the pandemic, such as the unemployment rate.

The aid will be linked to the European Semester, through which the Commission coordinates the budgetary policies of the countries, so that they will have to present recovery programs that are in line with their recommendations for aid.

The second pillar will take between 10 and 15% of the funds and will go to the private sector, based on a reinforcement of the InvestEU investment program, a new program for strategic investments and a new solvency instrument for companies.

Community sources clarify that with this last measure they do not plan to buy company shares, but rather provide guarantees to cover part of the risk assumed by the European Investment Bank in some projects.

The objective is to avoid the inequality that some countries have much more capacity than others to help their companies.

The last pillar will reinforce instruments that have been found necessary in this crisis, such as the new RescEU medical equipment reserve, the Horizonte research program or a new health program.


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