EU to borrow €800bn by 2026 for recovery fund

The European Commission has announced it plans to borrow around €800 billion by the end of 2026 — at the rate of around €150 billion a year — to finance the EU’s plan to make its economy greener and more digitalised.

The move will make the Commission the biggest debt issuer in euros, Reuters reported.

The EU will sell bonds at auctions and through syndication in a primary dealer network.

The Commission said it would sell bonds with benchmark maturities of 3, 5, 7, 10, 15, 20, 25 and 30 years and also bills below one year maturity – EU-Bills.

The borrowing will start as soon as the EU’s 27 national parliaments ratify the EU’s Own Resources Decision — a law raising guarantees from national governments to the EU budget to 2.0% of GNI (gross national income) from 1.4% GNI until 2058.

“The Commission has today taken steps to ensure that borrowing under the temporary recovery instrument NextGenerationEU will be financed on the most advantageous terms for EU Member States and their citizens,” said the Commission.

“The Commission will use a diversified funding strategy to raise up to around €800 billion in current prices until 2026.

“This approach, which will be in line with the best practices of sovereign issuers, will enable the Commission to raise the needed volumes in a smooth and efficient way.

“This will also attract investors to Europe and strengthen the international role of the euro.”

The Commission added: “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.

“This will translate into borrowing volumes of on average roughly €150 billion per year, which will make the EU one of the largest issuers in euro.

“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 NextGenerationEU borrowing have called for a fundamental change in the approach to capital markets.

“A diversified funding strategy will respond to these new funding needs.

“It will enable the Commission to mobilise all funds when required on the most advantageous terms for the EU Member States and their citizens.”

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Dalriada Media LLC sites are edited by veteran news journalist Mark McSherry, a former staff editor and reporter with Reuters, Bloomberg and major newspapers including the South China Morning Post, London's Sunday Times and The Scotsman. McSherry's journalism has also appeared in The Washington Post, The Guardian, The Independent, The New York Times, London's Evening Standard and Forbes. McSherry is also a professor of journalism and communication arts in universities and colleges in New York City. Scottish-born McSherry has an MBA from the University of Edinburgh and a Certificate in Global Affairs from New York University.