Commission to start borrowing recovery funds in June

EU commissioner for Budget, Johannes Hahn, on 14 April.

The European Commission confirmed on Monday (31 May) that it will start borrowing the €800 billion needed to finance the recovery fund in June, after all member states gave their approval to the issuance of EU debt which is on an unprecedented scale.

As planned, the 27 national parliaments completed by the end of May the ratification process of the Own Resources Decision, the EU legislation that allows the Commission to issue EU debt to finance the recovery fund. 

Gert Jan Koopman, responsible for the directorate general of Budget at the Commission, said on Monday that all member states completed the final details of the ratification process and the EU executive will go to the markets in June.

The institution is expected to borrow between €30 billion and €40 billion before the summer break, and around €150 billion per year by 2026.

The first transfers of the recovery funds, a total of 13% of pre-financing (around €104 billion), is expected to start flowing to national capitals by the end of July, once the Commission approves the reform and investment proposals submitted by the national governments to unlock the resources. 

Recovery fund faces new hurdles with first disbursements

The European Commission could find it difficult to transfer the first tranche of the recovery funds to all member states according to its calendar, as most plans are expected to be approved at the same time and there will be limited capacity to borrow from the markets.

To date, a total of 21 member states have  submitted their recovery plans: Belgium, Denmark, Germany, Greece, Ireland, Spain, France, Croatia, Italy, Cyprus, Latvia, Lithuania, Luxembourg, Hungary, Austria, Poland, Portugal, Slovenia, Slovakia, Finland, and Sweden.

The Commission is expected to green light the first plans by the end of June, and the Council will have an additional month to give their approval based on the Commission’s verdict. 

Member states tried to shorten the Commission’s two-month assessment process, given that the Commission has been discussing the draft plans with some governments since last October.

The EU executive however said that it will exhaust all the time stipulated in the recovery facility legislation, given the immense amount of information submitted by national treasuries and the need to translate each recovery plan into legal instruments.

Pressure mounts on member states to ensure successful roll-out of recovery fund

As the EU recovery fund slowly nears its implementation phase, member states’ absorption capacity and control mechanisms are considered among of the main challenges for its successful roll-out.

[Edited by Benjamin Fox]

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