We do not know which countries will apply for loans: I assume that those 17 countries that borrowed from the EU’s employment-support loan facility SURE (temporary Support to mitigate Unemployment Risks in an Emergency) will also borrow from NGEU. However, the Commission’s Next Generation EU (NG-EU) plan contains very innovative instruments, and even though it is meant to be temporary, it could represent a step towards reforming Europe’s institutional set-up that has long been described in the literature as ‘incomplete’ (e.g. Starting Date: 01/09/2020 Fourth, I adjust the time profile of the Commission’s initial proposal for actual euro payments with the assumption that all payments that were planned by the Commission to be made after 2026 will be made in 2026. Estimates of payments countries will receive from the Next Generation EU instrument can be made with some degree of precision. For these reasons, it is the Commission's intention that Next Generation EU should not only favour Lindro - Next Generation EU: between frugal countries and a rising EU budget In an interview with Italian newspaper Lindro, Policy Fellow Thu Nguyen emphazises the importance of the Merkel-Macron Recovery Fund as an important step for the future of the EU. The impact of EU debt on the EU market of safe assets. This blogpost also updates my earlier calculations for the total (at 2018 prices) cross-country allocations, resolving an important ambiguity in the European Council conclusions thanks to a recent Commission estimate (see the details at the end of this post). By pressing “OK” you accept our Cookie Policy. To help finance the post-coronavirus recovery, the European Union is raising large amounts to pass on to its members. Together, the MFF and EU recovery package will … It may be a critical juncture in achieving greater financial solidarity among member states in a time of acute economic crisis in the aftermath of the COVID-19 pandemic. As a 2018 special report of the European Court of Auditors (ECA) highlighted, the rush to absorb funds can lead to insufficient consideration of value for money. In my calculations, I find that for the EU as a whole the amount of €390 billion in 2018 prices decided by the European Council for grants and guarantees will lead to €420 billion in actual euro payments. Topic: European Macroeconomics & Governance. The same expression, “loss in real GDP”, is used for ReactEU by the Commission referring to the “share of each Member State of the total loss of real seasonally adjusted GDP expressed in EUR between the first semester of 2019 and the end of the applicable reference period for all Member States considered”. This also implies that EU borrowing will amount to €420 billion and not the 2018 price value of €390 billion (provided that all payments will be made which we cannot take for granted, see here). But estimating countries' repayments up to 2058 is extremely difficult. How much cake does everyone actually get and at what speed? This makes sense, because the EU budget is a well-established framework and hence can be deployed readily. I use the Commission GNI forecast up to 2022 and I assume that GNI growth in 2023-2025 will be the same as the IMF forecast GDP growth for these years. A glimmer of hope, however, is appearing on the horizon for many of these countries. Estimating the current euro value payments from NGEU grants and guarantees corresponding to the July 2020 European Council conclusions. The Next Generation Internet initiative by the Digital Single Market of the European Commission. However, the July 2020 European Council brought ambiguity, because it replaced the “unemployment criterion” with the “loss in real GDP” for 30% of RRF allocation, but did not specify how to measure it (see point 16 here). By: By pressing “OK” you accept our Cookie Policy. Existing estimates, including my earlier ones, allocated these 2018 price amounts across countries, or reported the yearly breakdown of the total, but did not include the yearly breakdown per country in current prices in euros. Topic: ICT-53-2020: 5G PPP – 5G for Connected and Automated Mobility (CAM); ICT-53-2020 Call for proposal: H2020-ICT-2019-3. Thus, the natural conclusion was that the loss in real GDP means the same for ReactEU and RFF and I used this assumption to estimate the new allocation of the RFF. EU leaders also agreed the 2021-2027 multiannual financial framework (MFF), setting a budget of EUR1.074 trillion. Croatia was similarly a poor performer with a 2014-2020 ESIF absorption rate of just 39% (by 23 September 2020), yet Croatia is expected to receive grants from NGEU equivalent to more than 10% of its GDP, with potentially another 6.8% as loans. Country-specific recommendations (CSRs) are made in the context of the European Semester, the EU’s annual economic policy coordination mechanism. Estimates of payments countries will receive from the Next Generation EU instrument can be made with some degree of precision. Spolaore 2016, Cecchetti and Schoenholtz 2020). The calculations described so far relate to the EU as a whole. The sum of the actual euro value of yearly commitments will have to be equal to sum of the actual euro value of yearly payments, hence I derived total euro payments in actual euros. After five days of deliberation, negotiation and compromise, leaders of the 27 governments that make up the European Union (EU) unanimously agreed to an unprecedented €750 billion "Next Generation EU" (NGEU) Recovery Fund - to support member countries' recovery from the pandemic-induced recession, and multinational financial … - Belgium -, There is a difference between commitments (a promise to pay) and payments (money actually disbursed) in the EU budget (see an explanation of this differentiation. It also opens the door to some central tax collection. With the European Union for the first time taking on debt to help finance the economic recovery from the coronavirus, new resources are needed to fund the EU budget. The European Union has initiated its largest bailout in decades, the Next Generation EU Plan, a 500-billion-euro Marshall-type scheme that will reimburse the business sectors most in need of help, especially in the countries most reliant on tourism. reliance on non-EU countries for strategic supply chains of medical equipment(e.g. The European Council specified the total amounts of NGEU commitments at 2018 prices; The sum of yearly commitments measured at 2018 prices over the 2021-2023 period must be equal to the total amount set by the European Council; The EU budget includes actual euro amounts for both commitments and payments: the total euro amount of commitments made in 2021-2023 must be equal the total euro amount of payments in 2021-2026; In EU budgeting practice, as mentioned above, the 2018 price values are converted to actual euro values by assuming a 2% annual inflation rate, irrespective of the actual inflation rate; As such the time profile of commitments at 2018 prices has an impact on the actual euro amounts; Another implication is that since, as mentioned above, the actual euro amount of commitments over 2021-2023 equals the actual euro amount of payments in 2021-2026, the sum of 2018 price commitments over the 2021-2023 period will not be equal to the sum of 2018 price payments over 2021-2026; While the May 2020 Commission proposal was complete, including the yearly breakdown of the actual euro amounts of commitments and payments (from which one can calculate the 2018 price amount of commitments to confirm that the sum of annual amounts is equal to the 2018 price total amount), the European Council conclusions did not break down the annual values; The European Council changed the total amounts measured at 2018 prices relative to the Commission proposal and brought the cut-off dates closer, requiring that all NGEU commitments be made by the end of 2023 and NGEU payments be completed by the end of 2026. Project Acronym: 5G-Blueprint. EUROPE. On 27 May Commission President Ursula von der Leyen unveiled the Next Generation EU recovery plan that aims to address the damage caused by the pandemic and invest in a green, digital, social and more resilient EU.. Zsolt Darvas Next Generation EU. The Commission itself published the results of its calculation for the Recovery and Resilience Facility (RRF) and the Just Transition Fund, while for the increased agricultural subsidies the allocation follows a 2018 proposal and hence is also known. Opinions of the EU – both positive and negative – have remained unchanged since 2017 in all but three countries. The European Council set an amount of €390 billion at 2018 prices for grants (which also includes some guarantees). The 2014-2020 pay-out rates are based on the Commission’s ‘Regional Policy 2014-2020 EU Payment Details by EU Countries’ dataset (which includes the ERDF and CF only). But estimating countries' repayments up to 2058 is extremely difficult. It didn't happen overnight, but it did happen. The Special European Council of July 2020 defined the total amount of Next Generation EU (NGEU) commitments at 2018 prices. There are two uncertainties related to NGEU loans. The focus should be on worthwhile spending, not just on absorbing EU funds. Estimating the current euro value payments from NGEU loans corresponding to the July 2020 European Council conclusions. But absorption of EU funds is typically slow and some countries might struggle to spend what they can get, even if they will have broad freedom to design spending programmes. This additional funding will be repaid over a long period of time through future EU budgets – between 2028 and 2058. See the methodology of these estimates here. A recovery from the COVID-19 recession is underway though the suffering is far from over, especially for the most vulnerable. The European Commission’s vision is for these programs to last from 2021-2027 as part of the EU budget. What will happen to infrastructure financing in a post-COVID world? In the same year the Commission is expected to put forward a proposal for a carbon adjustment measure and a digital levy, both of which would be introduced by the end of 2022. Copyright © Bruegel 2015 Bruegel: Rue de la Charité 33-1210 Brussels In order to estimate country-specific yearly values, I assume that the % distribution across the years is the same for each country (but separately, of course, for each of the seven components of NGEU). To read about our cookie usage and our privacy policy click here. For the 2014-2020 period, Spain had absorbed only 39% of the money it was due from European Structural Investment Funds (ESIFs) by 23 September 2020 – the EU’s worst rate – while Italy at 40% is also among the slowest. Additionally, I have updated the expected cross-country allocation of ReactEU using most the recent quarterly GDP and unemployment data as well as the November 2020 forecast of the European Commission. People between the ages 15 to 24 make up almost 20% of the world’s population.3 In order to calculate how much each country is expected to get from NGEU in each year, estimating the difference between amounts measured at 2018 prices and at current euro values requires a careful consideration for the following reasons: Thus, the annual breakdown of actual euro amounts corresponding to the European Council conclusions cannot be easily calculated by just multiplying the actual amounts from the initial Commission proposal by the ratio of the Council totals to the Commission totals because the timeframe has changed, modifying the yearly distribution of 2018 price annual figures, which impacts the actual euro figures. Join NEXTGen. Zsolt Darvas 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 … To deliver on the goals of the European climate law, the European Union needs finally to get coal out of its energy mix: the EU should quicken the pace of decarbonisation whilst delivering on its goal of social inclusion. When adding Next Generation EU to the proposed size of the 2021-2027 MFF of €1.1 trillion, the total financial firepower of the EU budget reaches €1.85 trillion, equivalent to around 13% of EU GDP at 2019 levels. (2020) ‘Will European Union countries be able to absorb and spend well the bloc’s recovery funding?’ Bruegel Blog, 24 September. In September 2020, the Commission published new estimates for the RRF allocation corresponding to the July 2020 European Council conclusions, which apparently uses a different interpretation of the “loss in real GDP”. Estimates of payments countries will receive from the Next Generation EU instrument can be made with some degree of precision. ), and additional resources required by common objectives linked to the green transition and the digital transformation. Revising my earlier estimates for the total cross-country allocations at 2018 prices. Thus, for 71% of NGEU grants and guarantees, the cross-country allocation was known. Thus, I alter the expected 2021 and 2022 RRF payments so that 10% of the total 2021-2026 payments will be made in 2021 and reduce the 2022 payments correspondingly, so that the sum of 2021 and 2022 payments (measured in current price euros) remains the same. ... supporting on the ground & in country UNICEF projects, and driving social media campaigns, to give a few examples. For the new EU Multiannual Financial Framework (MFF) period starting in January 2021, countries will have to absorb: (a) The remaining portions of the 2014-2020 MFF funds, which are rather large for many countries; (b) The ‘standard’ seven-year 2020-2027 MFF funds; and. The expected annual pay-out speed of NGEU is from the 28 May 2020 European Commission proposal, adjusted by the modifications approved by the 21 July 2020 European Council, which set the pre-financing for the Recovery and Resilience Facility, the largest component of NGEU, at 10% in 2021, required that all NGEU-related payments will have to be made by 31 December 2026, and changed the available amounts of all instruments of NGEU compared to the Commission’s initial proposal. First, I adjust the initial Commission proposal to the new timeframe by assuming that the commitments (measured at 2018 prices) planned by the Commission after 2023, will be made in 2023. 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