European Commission: Presentation by Commissioner Hahn of the NextGenerationEU – Funding strategy to finance the Recovery Plan for Europe

Ladies and Gentlemen,

In July last year, the Heads of States and Governments agreed on the recovery instrument Next Generation EU as a part of a financial package of unprecedented volume. Together with the core Multi Annual EU Budget we managed to get the biggest financial package ever approved, with a volume of €1.8 trillion.

Today, when we are forced to witness that the crisis is still holding its grip on Europe, we realize how essential and far-sighted this decision was!

Our economies and societies continue to be still heavily affected by the pandemic. Whilst Member States, supported by the European Commission, did their best to contain the economic damage, whilst the Multiannual Financial Framework is already in place, it is clear that we will need fresh money. Not only to get our economies back on track, but to pave the way for a truly sustainable and resilient recovery and the digital and green transformation.

“Next Generation EU” will be at the heart of Europe’s recovery and my services have worked tirelessly under my guidance to get the necessary framework and legal provisions in place. This means that we will be ready to start borrowing on the markets as soon as the Own Resources Decisions have been ratified by all 27 Member States.

The NGEU Diversified Funding Strategy that the European Commission adopted this morning will allow us to raise €800 billion (in current prices) between now and end 2026. This is urgently needed money, which Member States will receive as grants or loans on favourable conditions for investments and reforms based on their reform- and resilience plans which we are finalising together in the coming weeks. The volume of €800 billion means that we will borrow on average €150 billion per year.

Our NGEU Funding Strategy will include a Green Bond issuance programme of up to €250 billion to meet the 30% target. The European Commission is working on a green bond framework and we are confident that Member States will live up to their responsibility as well. Once adopted, a Green Bond programme of this scale will make the EU the biggest issuer of sustainable bonds on the financial markets.

The Green bonds programme of such a scale demonstrates impressively the alignment of our financial policy with one of our most important political priorities – the Green Deal – and our commitment to sustainability at all levels. This can pave the way for an environmentally sustainable growth model.

Given the volumes, frequency and complexity of the borrowing, the Commission will need a specific approach – similar to the one of sovereign borrowers. Therefore, we will implement a diversified funding strategy:

We will use multiple funding instruments – medium and long-term bonds as well as (short-term) EU bills – to maintain flexibility in terms of market access and to manage liquidity needs and the maturity profile. The combination of syndications and auctions will allow us to raise money in the most cost-efficient manner.

Of course, the Commission will continue to coordinate with other issuers, above all the EU Member States, complementing their national borrowing actions, but also with supranationals.

To observe full transparency, we will publish every 6 months funding plans to investors and stakeholders.

Our diversified funding strategy will be supported by banks organised in a strong primary dealer network. They will distribute our bonds to a global investor base and ensure liquid secondary markets for our investors.

Finally, some words about the political and economic significance of our NGEU borrowing strategy:

First and foremost, NGEU will prove as one of our most efficient crisis management tools by providing money on extremely advantageous terms to Member States. Being able to count on a secure source of money will help our economies recover and offer relief to the heavily burdened national budgets.

The NGEU strategy will offer benefits in terms of stability and depth of the European bond market by providing a euro-denominated safe asset covering all maturities. The introduction of EU-Bills is a landmark development in this regard. More attractiveness for investors will also increase the attractiveness of the Euro area as a place of investment. Therefore, today’s strategy also provides the basis to strengthen the Euro’s role on the international capital markets.

It is no exaggeration to claim therefore that our NGEU borrowing programme will be a real GAME CHANGER on the capital markets. The successful SURE programme which served as a kind of test run makes us confident that the NGEU bonds will meet both our and the investors’ expectations.

Finally, and in a wider context, beyond the economic and financial aspects, the NGEU borrowing on behalf of all EU Member States, will strengthen the EU’s cohesion and its political standing at global level as a Union that demonstrates solidarity, innovation and the capacity to deliver in an unprecedented crisis.

Having said all this, I would like to recall that NGEU is a temporary instrument and this is why time is of essence! We have a window of opportunity between now and 2026 to manage Europe’s recovery and to boost the modernisation of the European economy via the green and digital transition. Let us not waste this time – the crisis requires quick action on all fronts.

I appeal therefore to those Member States which have not yet ratified the Own Resources Decision to speed up the process. We respect of course all constitutional provisions like the order of the German Constitutional Court, remaining confident that all necessary procedures will be finalised in due time so that we can start our borrowing programme as scheduled, at the beginning of the second Semester. Citizens, businesses and regions have no time to lose and we have to live up to our commitment. Confidence is built by action and in this respect, we – Member States and the EU Institutions – have to join forces!


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