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How is the EU helping Europe recover from the COVID-19 pandemic?

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How is the EU helping Europe recover from the COVID-19 pandemic?
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What is the EU doing to help Europe recover from the COVID-19 Pandemic? Euronews finds out in this week's episode of Real Economy.

The EU'S SURE scheme explained

The European Commission’s SURE (Support to Mitigate Unemployment Risks in an Emergency) initiative is providing emergency loans of up to 100 billion euros to 18 countries to back government furlough schemes keeping workers on the payroll.

A recent report showed that SURE has been successful in supporting between 25 and 30 million people - and between 1.5 and 2.5 million firms in 2020.

The Next Generation EU recovery plan is designed to strengthen Europe’s economy and help member states get back on their feet, making their economies more resilient and fit for the future. It is made up of 750 billion euros in grants and loans.

How is it all being funded?

Both SURE and Next Generation EU are being financed by borrowing at EU level.

The European Commission, on behalf of the EU, is issuing up to 850 billion euros in bonds on the capital markets (900 in current prices) over the next 5 years. This will be repaid by 2058.

The bonds include social and green bonds, meaning the funds serve a truly social or green objective.

However a major difference between the two is the back-to-back loan funding of SURE and the diverse funding strategy of NGEU.

Most of the SURE bonds have already been issued. The Commission intends to start borrowing in the summer of 2021 for Next Generation EU, depending on whether it is legally enabled to borrow at such a scale.

What are the benefits of borrowing at EU level?

Borrowing at a European level means that all EU countries' economies get a helping hand to recover. The EU can obtain advantageous pricing conditions which are being passed on directly to Member States and, ultimately to EU citizens.

SURE’s success on the markets has saved EU governments around 5.8 billion euros in interest payments so far.

The EU’s high credit rating, plus ability to guarantee the debt, means investors are more confident buying EU bonds.

It is the first time the EU is borrowing on such a big scale on the capital markets. The large-scale borrowing creates new safe financial instruments in the euro. This draws more investments to the EU and helps underpin the international position of the euro.

This in turn helps underpin the international position of the euro in particular by increasing the pool of euro-denominated assets with high credit rating.