EC proposes 750BN euro ‘Next Generation EU’ rescue plan

The European Commission is proposing to create a new recovery instrument, Next Generation EU, with a 750 billion euro budget to ensure the economy recovery from the Covid-19 crisis is “sustainable, even, inclusive and fair for all member states.”

This was announced on May 27 in an address to the European Parliament by European Commission President Ursula von der Leyen.

Under the proposal, Bulgaria would contribute 3.3 billion euro to the budget of Next Generation EU, but would stand to receive 15 billion euro. This would make the country the second-largest net recipient of funds, as a share of gross domestic product, at 19.3 per cent of annual GDP, among EU member states.

The European Commission said that the coronavirus “has shaken Europe and the world to its core, testing healthcare and welfare systems, our societies and economies and our way of living and working together”.

To protect lives and livelihoods, repair the Single Market, as well as to build a lasting and prosperous recovery, the European Commission is proposing to harness the full potential of the EU budget, it said.

“Next Generation EU of 750 billion euro as well as targeted reinforcements to the long-term EU budget for 2021-2027 will bring the total financial firepower of the EU budget to 1.85 trillion euro.”

Von der Leyen said that the recovery plan “turns the immense challenge we face into an opportunity, not only by supporting the recovery but also by investing in our future: the European Green Deal and digitalization will boost jobs and growth, the resilience of our societies and the health of our environment.

“This is Europe’s moment. Our willingness to act must live up to the challenges we are all facing. With Next Generation EU we are providing an ambitious answer,” she said.

Next Generation EU will raise money by temporarily lifting the own resources ceiling to two per cent of EU Gross National Income, allowing the Commission to use its strong credit rating to borrow 750 billion euro on the financial markets, the Commission said.

This additional funding will be channelled through EU programmes and repaid over a long period of time throughout future EU budgets – not before 2028 and not after 2058.

“To help do this in a fair and shared way, the Commission proposes a number of new own resources.”

In addition, in order to make funds available as soon as possible to respond to the most pressing needs, the Commission proposes to amend the current multiannual financial framework 2014-2020 to make an additional 11.5 billion euro in funding available already in 2020.

The money raised for Next Generation EU will be invested across three pillars, the Commission said.

One will include a new Recovery and Resilience Facility of 560 billion euro, which will offer financial support for investments and reforms, including in relation to the green and digital transitions and the resilience of national economies, linking these to the EU priorities.

This facility will be “embedded” in the European Semester. It will be equipped with a grant facility of up to 310 billion euro and will be able to make up to 250 billion euro available in loans.

“Support will be available to all member states but concentrated on the most affected and where resilience needs are the greatest,” the European Commission said.

There will be a 55 billion euro top-up of the current cohesion policy programmes between now and 2022 under the new REACT-EU initiative to be allocated based on the severity of the socio-economic impacts of the crisis, including the level of youth unemployment and the relative prosperity of member states.

The Commission is proposing to strenghten the Just Transition Fund up to 40 billion euro, to assist EU countries in accelerating the transition towards climate neutrality.

There will be a 15 billion euro reinforcement for the European Agricultural Fund for Rural Development to support rural areas in making the structural changes necessary in line with the European Green Deal and achieving the ambitious targets in line with the new biodiversity and Farm to Fork strategies.

The Commission titled the second pillar “Kick-starting the EU economy by incentivising private investments”.

This involves a new Solvency Support Instrument will mobilise private resources to urgently support viable European companies in the sectors, regions and countries most affected. It can be operational from 2020 and will have a budget of 31 billion euro, aiming to unlock 300 billion euro in solvency support for companies from all economic sectors and prepare them for a cleaner, digital and resilient future, the Commission said.

It will also involve upgrading InvestEU, Europe’s flagship investment programme, to a level of 15.3 billion euro to mobilise private investment in projects across the EU.

“A new Strategic Investment Facility built into InvestEU– to generate investments of up to 150 billion euro in boosting the resilience of strategic sectors, notably those linked to the green and digital transition, and key value chains in the internal market, thanks to a contribution of 15 billion euro from Next Generation EU,” the Commission said.

The third pillar is titled “Addressing the lessons of the crisis”.

This involves a new health programme, EU4Health, to strengthen health security and prepare for future health crises with a budget of 9.4 billion euro.

Further, a two billion euro reinforcement of rescEU, the Union’s Civil Protection Mechanism, which will be expanded and strengthened to equip the EU to prepare for and respond to future crises.

It also involves 94.4 billion euro for Horizon Europe, which will be reinforced to fund vital research in health, resilience and the green and digital transitions.

There will be support for Europe’s global partners through an additional 16.5 billion euro for external action, including humanitarian aid.

“Other EU programmes will be strengthened to align the future financial framework fully with recovery needs and strategic priorities. Other instruments will be reinforced to make the EU budget more flexible and responsive,” the Commission said.

Further details about the proposal are available via the Commission’s website.

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The Sofia Globe staff

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