Economic and Financial Affairs

To ensure the recovery is sustainable, even, inclusive and fair for all Member States, the European Commission is proposing to create a new recovery instrument, Next Generation EU, that will be embedded within a powerful, modern and revamped long-term EU budget. Next Generation EU will raise money by temporarily lifting the own resources ceiling to 2.00% of EU Gross National Income, allowing the Commission to use its strong credit rating to borrow €750 billion on the financial markets. 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 in funding available already in 2020. A key pillar of the proposal is the new Recovery and Resilience Facility, which will be embedded in the European Semester and will offer up to €560 billion of financial support (up to €310 billion in grants and up to €250 billion in loans) for investments and reforms, linking these to the EU priorities. Support will be available to all Member States but concentrated on the most affected and where resilience needs are the greatest. This financing 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. By harnessing the full potential of the EU budget, the Commission aims to protect lives and livelihoods, repair the Single Market, and build a lasting and prosperous recovery.

The SSI, which builds on the existing European Fund for Strategic Investments (EFSI), will match the recapitalisation needs of otherwise healthy companies across Europe which are at risk because of serious solvency difficulties caused by the crisis. Commission estimates based on corporate data suggest that solvency support needs could be in the region of €720 billion for 2020 alone but would be higher if lockdown measures stay in place for a longer period or in case of a second wave of the pandemic, and in a stress scenario in which GDP contracts by 15.5%, needs could rise to €1.2 trillion. The capital shortfalls resulting from the social and economic restrictions affect companies, workers and households directly. If unaddressed, they would lead to a longer period of lower investment and higher unemployment. Moreover, their impact would affect sectors and regions differently, putting the single market at risk, especially as Member States have vastly different capacities to support their businesses through State aid.

InvestEU is the EU's proposed flagship investment programme designed to kick-start the European economy. The first proposed change would see an increase of the InvestEU budget to reflect higher investment needs and an environment of increased risk. The financial envelope for the sustainable infrastructure window would be doubled, in line with the President's Communication "Europe's moment: Repair and Prepare for the Next Generation". The second proposed change would broaden InvestEU’s scope through the addition of a fifth window – the strategic European investment window – in order to account for the future needs of the European economy and to promote and secure strategic autonomy for the EU in key sectors. In the current coronavirus crisis, the market allocation of financial resources is not fully efficient and perceived risk impairs private investment significantly. If left unchecked, this can contribute to a ‘credit crunch’. A key feature of InvestEU is de-risking projects to crowd in private finance and this is particularly valuable and should be utilised under these circumstances.

With this disbursement, the EU has now provided Ukraine with €3.8 billion in MFA loans since 2014. This is the largest amount of MFA the EU has disbursed to any single partner country. The disbursement of the second and last tranche of the MFA operation became possible after Ukraine implemented twelve policy actions agreed with the EU. They included important measures in the areas of fighting against corruption and money laundering, the management of public finances, the banking sector, energy, healthcare and social policies. Ukraine is also finalising a new Stand-by Agreement with the International Monetary Fund and has implemented the associated prior actions. The EU is also making further MFA loans of €1.2 billion available to Ukraine, as part of the Decision to provide MFA to ten partner countries to help them limit the economic fallout from the coronavirus pandemic. This Decision – proposed by the Commission on 22 April – was adopted by the co-legislators on 20 May 2020. The Commission stands ready to disburse the first instalment of this new MFA as swiftly as possible after concluding a Memorandum of Understanding with Ukraine.

Under the terms of the investment announced on 27 May, the EIB will loan PLN 82m (around €18m) to Energy Solar Projekty sp.z o.o. for the construction and operation of 66 small-scale, independent photovoltaic (PV) plants. With a combined capacity of up to 66MW, the plants can serve the equivalent of 19,000 households and help reduce 47,000 tons of carbon dioxide each year. The deal is guaranteed by the European Fund for Strategic Investments, the financial pillar of the Investment Plan for Europe, a joint initiative of the EIB and the European Commission. The EU bank is also investing in the Spanish multinational Gestamp, which specialises in the development and manufacture of metal components for the automotive industry. The EUR 200 million loan agreed on 26 May will enable Gestamp to develop new research lines enabling the production of safer, lighter and therefore more environmentally friendly cars.