Commissioner Johannes Hahn says the EU will be ready to raise money on the capital markets by June but cooperation from the 27 member states is required.
ADVERTISEMENTThe European Commission is urging the 27 member states to speed up the ratification process of the EU's €750 billion recovery fund, as debate on the issue drags on in several countries and the summer deadline approaches.
"Time is of (the) essence," Johannes Hahn, European Commissioner for Budget, said on Wednesday morning. "Let us not waste this time."
Hahn underlined that the Commission is ready to go to the financial markets "by June" in order to raise the money for the fund, also known as Next Generation EU, and distribute it among member states.
But a procedural step is hampering the fund's roll-out: as of today, only 17 out of 27 member states have ratified the Own Resources Decision, the legislative instrument that enables the Commission to borrow the cash and repay it over the next decades.
All EU countries must sign the bill before the Commission can set the fund in motion.
"The message is clear: as soon as the Commission has been legally enabled to borrow, we are ready to get going," Hahn declared.
In addition to the ratification process, each member state has to submit its own recovery and resilience plan, explaining how it intends to spend the EU funds and setting out reforms and public investment projects. As a rule, countries have until April 30 to submit their agendas.
Following an internal assessment and discussions with national governments, which can last up to two months, each of the individual plans will have to be adopted by the Council of the EU.
In the most optimistic scenario, money from Next Generation EU could start flowing in July – a full year after EU leaders agreed to set up the landmark package.
Brussels is feeling the pressure to move fast. All eyes are on the EU after last month the US Congress passed a colossal $1.9 trillion relief bill to accelerate America' recovery. The International Monetary Fund has already upgraded its forecast for the US economy, from 5.5% to 6% in 2021.
Although the summer deadline is not legally binding, the Commission hopes it will serve to encourage the 10 remaining member states to expedite ratification. Those pending are Germany, the Netherlands, Austria, Ireland, Finland, Hungary, Poland, Romania, Estonia and Lithuania.
An unprecedented level of borrowing
Next Generation EU represents a transformational chapter in the history of the European Union and its financial competencies. Over the coming years, the fund's main block, the Recovery and Resilience Facility (RRF), will provide countries with a total of €672.5 billion, of which €312.5 billion will be grants and €360 billion will be loans.
The Commission plans to raise and distribute around €150 billion per year until 2026. Throughout the second semester of 2021, the executive is ready to hand out between €60 to €100 billion, a part of which would be made available as soon as all the signatures and national plans are in place.
An EU senior official told Euronews the burrowing for 2021 could be adapted if the ratification process takes too much time so as to compensate for the months lost in the summer. The official remarked that financial liquidity is not a problem at the moment and money would arrive with national governments irrespective of potential setbacks.
Next Generation EU was designed to advance the twin goals of making the bloc more sustainable and digital. Around 30% of the EU bonds (equal to €250 billion) will be green bonds, making the European Union the largest issuer of this kind of debt security. Another goal of the Commission is to leverage the massive burrowing to strengthen the international role of the euro.
"At the end of the day, we will only be successful if each and every member state is contributing to this reform agenda because it's about the recovery of the single market and the single market is only as successful as every part of the single market is," Commissioner Hahn told Euronews.
Repayments of the money raised to finance the grants and their corresponding interests will begin in 2028 when the EU approves its next multiannual budget for the 2028-2034 period. Loans will be repaid individually by those governments who request them. Wealthy countries are not expected to take up loans.
All borrowing should be repaid by 2058 at the very latest.
ADVERTISEMENTCommissioner Hahn insisted the recovery fund is a one-off, time-limited opportunity and refused to speculate about making it a permanent mechanism or putting forward a second stimulus package, as French President Macron has suggested.
"Let's cross the bridge when we are there, let's focus on what we have so far," Hahn said.
A German pause and a Polish debate
Confidence and worry are both brewing in Brussels. Recent developments in Germany and Poland are likely to alter the Commission's original schedule. Southern countries, badly hit by the pandemic, are awaiting the funds with increasing impatience.
But last month, the German Federal Constitutional Court paused Germany's ratification process in order to examine first an emergency appeal filed by the far-right party Alternative for Germany (AfD) and the civic group Bündnis Bürgerwille (Citizens' Will Alliance). Both argue the recovery fund breaches the EU treaties. It's unclear how long the court will take to respond to the legal challenge.
The German judges could eventually rule that the Own Resources Decision is in fact constitutional and therefore reject the appeal. But they could also conclude that extra provisions or conditions are necessary to allow the German president to sign off the bill, which had received large, cross-party support in both chambers of the Bundestag, the country's federal parliament.
ADVERTISEMENT"It was German Chancellor Merkel, together with President Macron, who very much pushed exactly for this financial facility (that) we have created on the basis of Article 122 in the Lisbon Treaty, which is exactly addressing the legal concerns of a country like Germany. So this means I am rather confident that it will be confirmed," Commissioner Hahn told Euronews.
"It's important that they (the German court) lift their reservation. And I'm also confident that this will be done in due time so that we are indeed not losing any time."
In Poland, trouble is also stirring up. The government is verging on collapse after one of the three parties in the ruling coalition threatened to vote down the country's recovery and resilience plan. Poland is set to be one of the largest beneficiaries of Next Generation EU, with €58 million earmarked for the following years.
United Poland, one of the parties in the coalition led by Law and Justice (PiS), is opposed to the joint borrowing and repayment of money and also to the rule of law mechanism that was promoted by the European Parliament. Last November, the mechanism triggered a temporary veto by Warsaw and Budapest, but both eventually relented.
Civic Coalition, the biggest opposition group in Poland, has also said it could vote against the plans because it fears the current right-wing government won't spend the money in a fair and transparent manner.
ADVERTISEMENT"It would be suicidal to reject the EU's post-pandemic recovery fund," Polish Finance Minister Tadeusz Kościński told the Financial Times as tensions in Warsaw grow.