The Commission (14 April) launched its borrowing strategy to raise €800 billion for the temporary recovery instrument NextGenerationEU. The funds will focus on green and digital financing. It will operate in a similar way to a sovereign wealth fund and will keep borrowing costs low for EU member states.
'NextGenerationEU is a game-changer for European capital markets'
The fund is likely to attract investors to Europe and strengthen the international role of the euro.
Johannes Hahn, Commissioner in charge of Budget and Administration, said: “NextGenerationEU is a game-changer for European capital markets. The funding strategy will operationalize 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. The message is clear: as soon as the Commission has been legally enabled to borrow, we are ready to get going!”
Borrowing to finance the recovery
NextGenerationEU – at the heart of the EU's response to the coronavirus pandemic – will be funded by borrowing on the capital markets. We will raise up to around €800 billion between now and end-2026. All borrowing will be repaid by 2058.
Diversified funding strategy: a snapshot
A diversified funding strategy combines the use of different funding instruments and funding techniques with open and transparent communication to the market participants.
The diversified funding strategy will help the Commission to achieve two main objectives: address the large funding needs of NextGenerationEU and obtain the desired low cost and low execution risk in the interest of all Member States and their citizens.
MEPs ready to take Commission to court for failing to protect EU budget
In a resolution adopted on Thursday (25 March) by 529 votes in favour, 148 against and 10 abstentions, MEPs recall that the failure of member states to respect the rule of law may affect the integrity of the EU budget. They warn the European Commission that if it fails to fulfil its obligations under the legally-binding conditionality regulation and does not take all appropriate measures to defend the EU’s financial interests and values, Parliament “will consider this to constitute a failure to act” and will take the Commission to court under Article 265 TFEU.
MEPs insist the existing rules on the rule of law must be applied and “cannot be subject to the adoption of guidelines”, a move the Commission is currently preparing. If the Commission does deem such guidelines necessary, today’s resolution requests they must be ready by 1 June 2021, and that Parliament should be consulted prior to their adoption. MEPs reiterate the importance of applying the Rule of Law mechanism without delay, particularly given its potential implications for the upcoming disbursement of the NextGenerationEU recovery fund.
The resolution voted on by MEPs today is the conclusion of the debate held at the previous plenary session, where MEPs reminded the Commission that the rule-of-law conditionality mechanism has already been in force since 1 January 2021.
Almost all speakers in that debate reiterated that the Regulation is legally binding – regardless of the position adopted by the European Council, which carries no legal effect, and despite the ongoing legal actions before the Court of Justice of the European Union, which do not have any suspensory effect. The rule-of-law conditionality mechanism is a new tool designed to protect EU funds from being misused by EU governments who are found to have failed to respect the principle of the rule of law.
- Steps of the procedure
- Committee on Budgetary Control
- Committee on Civil Liberties, Justice and Home Affairs
- The resolution as adopted (25.03. 2021) will be available here
- Plenary debate on the Rule of Law conditionality mechanism (video 11.03.2021)
- General regime of conditionality for the protection of the Union's budget
- EP Research Service - Protection of the Union's budget in case of 'rule of law' deficiencies (December 2020)
- Legislative schedule
- Free photos, video and audio material
Rule of law: MEPs warn Commission to activate the budget mechanism without further delay
In a plenary debate today (11 March), MEPs quizzed Commissioner Hahn on why the Commission has not yet used the mechanism to protect the EU’s budget from generalised deficiencies as regards the rule of law. Highlighting that the new rules entered into force on 1 January, almost all speakers reiterated that the provisions on the mechanism are legally binding, in contrast to the European Council’s conclusions on the matter, which carry no legal effect. Several speakers highlighted that using the mechanism is necessary to fulfil the EU’s promises and meet citizens’ expectations, in order to avoid losing credibility. On a similar note, some MEPs referred to the need to protect the real beneficiaries of EU funding (such as students and civil society) and asked for clarity on the state of the Commission’s digital platform dedicated to this end.
Many MEPs reacted strongly to Commissioner Hahn’s statement that work on the guidelines for the new mechanism needs to be completed before activating the mechanism, and that these need to take into account the ECJ ruling (expected in May) where appropriate. Highlighting an array of long-standing issues and the continuous deterioration of the situation in some countries, including Hungary and Poland, they asked for immediate action to prevent further damage to the EU’s budget and values. Some also pointed out the Commission’s obligation to act as a politically independent body and its role as the guardian of the Treaties.
In contrast, a few speakers denounced the debate and the mechanism itself as politically motivated, with some among them asking for the Council’s conclusions to be respected.
You can catch up with the debate here.
Parliament will vote on a draft resolution on this topic during its March II plenary session, scheduled for 24-25 March.
According to the rules approved in December 2020, the Commission, after establishing that there has been a breach, will propose that the conditionality mechanism should be triggered against an EU government, and subsequently either cut or freeze payments to that member state from the EU budget. The Council will then have one month to vote on the proposed measures (or three months in exceptional cases), by qualified majority.
- Committee on Civil Liberties, Justice and Home Affairs
- Procedure file (mechanism)
- Procedure file (resolution)
- EP Research Service: Protection of the Union's budget in case of 'rule of law' deficiencies (December 2020)
- The EU’s long-term budget - Rule of law: new mechanism aims to protect EU budget and values
- Legislative train
- Rule of law concerns in member states: how the EU can act (infographic)
- “Rule of law: First Annual Report on the Rule of Law situation across the European Union” (EC Press Release, 30.09.2020)
- The European rule of law mechanism - European Commission factsheet
- European Parliament Research Briefing: European added value of an EU mechanism on democracy, the rule of law and fundamental rights - Preliminary assessment (30.09.2020)
- Free photos, video and audio material
Parliament approves seven-year EU budget 2021-2027
Parliament gave its consent on Wednesday (16 December) to the next Multiannual Financial Framework (MFF) so that EU support can get to citizens as from the start of next year. On Wednesday, the text agreed with Council on 10 November on the long-term EU budget for 2021-2027 was approved with 548 votes in favour, 81 against and 66 abstentions. The text agreed with Council on the Interinstitutional Agreement (IIA) was approved with 550 votes in favour, 72 against and 73 abstentions.
€15 billion in top-ups for key EU programmes
This increase is the result of Parliament’s negotiating efforts to boost 10 selected EU flagship programmes over the next seven years to better protect citizens from the COVID-19 pandemic, provide opportunities to the next generation, and preserve European values. Thanks to this compromise, in real terms, the European Parliament triples the envelope for EU4Health, secures the equivalent of an additional year of financing for Erasmus+ and ensures that research funding will keep increasing.
- €11 billion will be drawn mainly from amounts corresponding to competition fines (which companies have to pay when they do not comply with EU rules), in line with Parliament’s long-standing request that money generated by the European Union should stay in the EU budget. This €11bn will gradually increase the overall MFF ceiling (set at €1,074.3bn in 2018 prices) to €1,085.3bn.
- €4bn will be financed from reallocations and margins within the MFF.
- In addition, €1bn will be set aside to address any future needs and crises and could also be added to the flagship programmes.
New Own Resources
Negotiators agreed to the principle that the medium- to long-term costs of repaying the debt from the recovery fund should neither come at the expense of well-established investment programmes in the MFF, nor result in much higher GNI-based contributions from member states. Therefore, EP negotiators have devised a roadmap to introduce new Own Resources to feed into the EU budget during the next seven years.
This roadmap is part of the ‘Interinstitutional Agreement’, a legally binding text. In addition to the contribution made as of 2021, based on how much unrecycled plastic a country has, the roadmap includes an ETS (Emissions Trading System)-based Own Resource (from 2023, possibly linked with a carbon border adjustment mechanism). It also includes a digital levy (from 2023), and a Financial Transaction Tax-based Own Resource as well as a financial contribution that the corporate sector must make or a new common corporate tax base (from 2026).
Parliament will keep an eye on how Next Generation EU funds are spent
Concerning the expenditure of Next Generation EU funds, Parliament secured regular meetings between the three institutions to assess the implementation of funds made available on the legal basis of Art. 122. These exceptional funds, provided outside the regular budget to restart the economy heavily impacted by the pandemic, will be spent in a transparent manner and Parliament, together with Council, will check any deviation from previously agreed plans.
The recovery instrument (Next Generation EU) is based on an EU treaty article (Art. 122 TFEU) which does not provide for any role for the European Parliament. EP negotiators have therefore insisted and obtained a new procedure, setting up a “constructive dialogue” between Parliament and Council. Once the Commission has assessed the budgetary implications of any proposed new legal act on the basis of Article 122, the dialogue between Parliament and Council will begin.
Horizontal issues: biodiversity targets, gender and equal opportunities
There will be improved tracking to make sure that at least 30% of the total amount of the European Union budget and Next Generation EU expenditures will support climate protection objectives, and that 7.5% of annual spending will be dedicated to biodiversity objectives from 2024 and 10% from 2026 onwards.
Gender equality and gender mainstreaming will now be prioritised in the MFF, through a thorough gender impact assessment and monitoring of the programmes.
The European Parliament’s negotiating team for the next long-term EU budget and Own Resources reform
Johan Van Overtveldt (ECR, BE), Chair of the Committee on Budgets
Jan Olbrycht (EPP, PL), MFF co-rapporteur
Margarida Marques (S&D, PT), MFF co-rapporteur
José Manuel Fernandes (EPP, PT), Own Resources co-rapporteur
Valérie Hayer (RENEW, FR), Own Resources co-rapporteur
Rasmus Andresen (Greens/EFA, DE)
The Council of the EU must formally endorse the MFF regulation and Interinstitutional Agreement, after which they will be published in the Official Journal and come into force from 1 January.
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