EU ready to issue debt to finance Recovery Fund
The European Union (EU) can now start making available funds under the Recovery and Resilience Facility to finance the Pandemic Recovery Fund, with ratification by the EU-27 of the so-called Own Resources Mechanism, which is essential for Brussels to tap the markets, coming into force on June 1.
"The European Union is now able to obtain the necessary funding for the European social and economic recovery", the Portuguese Prime Minister, Antònio Costa, whose country holds the rotating presidency of the EU, stressed in a statement.
With this ratification, which has taken place over a period of five months, the governments and national parliaments of the EU-27 have demonstrated "a strong sense of solidarity and responsibility", according to Costa.
The last laggard countries completed formal notifications the day before of their green light for the EU to start making funds available under the Recovery and Resilience Facility.
"We cannot afford to waste more time. We must ensure the swift approval of the first recovery and resilience plans by the end of June," stressed the Portuguese chief executive.
Austria and Poland, the last two EU countries that had not yet done so, ratified last Thursday the own resources decision, i.e. the legislation that will allow the Commission to issue debt backed by the margins of the EU budget in an unprecedented volume.
But some formalities remained to be completed, such as the formal notification to the EU Council by these two Member States and the Netherlands, Hungary and Romania, which took place the day before.
The own resources decision empowers the European Commission to borrow up to €750 000 million in 2018 prices on capital markets on behalf of the EU as early as this month, and the first disbursements can start in July.
€312.5 billion of grants and €360 billion of loans will be available for public investment and reforms presented in the national recovery and resilience plans drafted by each member state.
However, for this to be possible, the Commission and the Council, which brings the countries together, need to give their approval to the national reform and investment plans that each national government must send to the EC.
Romania was the last to do so late yesterday, leaving only five member states yet to submit their plans to the European Commission.
Along with Romania, Spain, Belgium, Denmark, Germany, Greece, France, Croatia, Italy, Cyprus, Latvia, Lithuania, Luxembourg, Hungary, Austria, Poland, Portugal, Slovenia, Slovakia, Finland, Ireland and Sweden have fulfilled this requirement.
Once the national governments submit their plans, it is for the European Commission to assess them within two months. The Council has then four weeks to approve each plan by means of an implementing decision. Spain submitted its plan on April 30.
The Commission will verify that the plans respect the objectives of allocating 37% of the funds to climate transition and 20% to digitalisation, and that they contribute to complying with the economic policy recommendations it makes each year, among other criteria.
TPre-financing of 13% of the total amount allocated to each member state will be made available to national governments after the approval of their recovery and resilience plans, some 9 billion euros in the case of Spain, which is entitled to some 140 billion from the recovery fund, 70 billion of them in transfers.
The rest of the funds will be disbursed taking into account the achievement of the milestones and targets set in the national recovery and resilience plans.
It is expected that once the machinery is in place, Brussels will raise around €150 billion a year until 2026 and make payments to countries every six months if they comply with their plans.