Proposal for a Regulation establishing a European Union Recovery Instrument to support the recovery in the aftermath of the COVID-19 pandemic

Author (Corporate)
Series Details COM (2020) 441
Publication Date 27/05/2020
Content Type

Summary:

Initiative put forward by the European Commission on 27 May 2020, aimed at establishing a European Union Recovery Instrument - also known as Next Generation EU.

Further information:

The COVID-19 (coronavirus) pandemic was not only a sanitary emergency but also had a strong socioeconomic impact across the European Union (EU). In response, Member States adopted a series of measures to support workers and companies facing the consequences of the outbreak. While the virus affected all Member States, the impact and the potential for recovery looks very different. While every Member State was able to support its workers and companies as much as possible, not all could do this to the same extent. This has created the risk of an imbalanced recovery, an uneven playing field and widening disparities across the EU.

A comprehensive plan for European recovery requires considerable amounts of public and private investment at European level. To provide the financing for the proposed Instrument, the Commission proposes an amendment to the Own Resources Decision (ORD) which would authorise the EU to borrow temporarily and exceptionally an amount of €750 billion, the increase the own resources ceiling to accommodate the liabilities and contingent liabilities for loans to the Member States. This proposal determines the allocation of funds to different EU programmes in line with the strategy set out in the European Recovery Plan.

  • €500 billion to be spent for non-repayable support, repayable support through financial instruments or for provisioning for budgetary guarantees and related expenditure;
  • €250 billion to be used to provide loans to Member States (the EU is to bear contingent liability in the form of a guarantee for those loans until they are repaid).

The proposed EU Recovery Instrument was put forward in the framework of a revamped package of proposals for the Multiannual Financial Framework (MFF) 2021-2027 in light of the challenges imposed by the pandemic.

Related sectoral legislative initiatives:

Source Link https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=COM:2020:441:FIN
Related Link(s)
Commentary and Analysis
UK in a Changing Europe: Analysis, 28/05/2020: Next Generation EU (NGE): the Commission’s Covid-19 recovery package https://ukandeu.ac.uk/next-generation-eu-nge-the-commissions-covid-19-recovery-package/
OSW: Analyses, 03/06/2020: Recovery plan for the EU economy: Central European countries react https://www.osw.waw.pl/en/publikacje/analyses/2020-06-03/recovery-plan-eu-economy-central-european-countries-react
CEPS: In Brief, 04/06/2020: Next Generation EU Bonds Might Face a Credit-Rating Challenge https://www.ceps.eu/next-generation-eu-bonds-might-face-a-credit-rating-challenge/
Fitch Ratings: Research, 08/06/2020: EU MFF Proposal Consistent with 'AAA' Debt Coverage Metric https://www.fitchratings.com/research/sovereigns/eu-mff-proposal-consistent-with-aaa-debt-coverage-metric-08-06-2020
Bruegel: Blog, 10/06/2020: Three-quarters of Next Generation EU payments will have to wait until 2023 https://www.bruegel.org/2020/06/three-quarters-of-next-generation-eu-payments-will-have-to-wait-until-2023/
EPRS: Briefing, July 2020: Next Generation EU - Where are assigned revenue? Which impact in 2021? https://www.europarl.europa.eu/thinktank/en/document.html?reference=IPOL_BRI(2020)656549

News
The Sofia Globe, 27/05/2020: EC proposes 750BN euro ‘Next Generation EU’ rescue plan https://sofiaglobe.com/2020/05/27/ec-proposes-750bn-euro-next-generation-eu-rescue-plan/
Politico, 27/05/2020: European Commission proposes €750B EU recovery package https://www.politico.eu/article/commission-to-propose-recovery-instrument-of-e750-billion/

Official
European Commission: Q&A : Next Generation EU - Legal Construction (9 June 2020) https://ec.europa.eu/commission/presscorner/detail/en/qanda_20_1024

ESO Records
Franco-German initiative for European economic recovery in the wake of the COVID-19 pandemic https://www.europeansources.info/record/franco-german-initiative-for-european-economic-recovery-in-the-wake-of-the-covid-19-pandemic/

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Record URL https://www.europeansources.info/record/?p=521883