Economic and Financial Affairs

Compared to the previous forecast in the spring, the growth rate for 2021 is significantly higher in the EU (+0.6 pps.) and the euro area (+0.5 pps.), while for 2022 it is slightly higher in both areas (+0.1 pp.). Real GDP is projected to return to its pre‑crisis level in the last quarter of 2021 in both the EU and the euro area. For the euro area, this is one quarter earlier than expected in the Spring Forecast. Growth is expected to strengthen because activity in the first quarter of the year exceeded expectations and the improved health situation prompted a swifter easing of pandemic control restrictions in the second quarter. Upbeat survey results among consumers and businesses as well as data tracking mobility suggest that a strong rebound in private consumption is already underway. In addition, there is evidence of a revival in intra-EU tourist activity, which should further benefit from the entry into application of the new EU Digital COVID Certificate as of 1 July. Together, these factors are expected to outweigh the adverse impact of the temporary input shortages and rising costs hitting parts of the manufacturing sector. Inflation rates are slightly higher but expected to moderate in 2022. Uncertainty and risks surrounding the growth outlook are high, but balanced overall. They include the pace of vaccination campaigns, the response of households and firms to changes in restrictions, and the trend in inflation.

Specifically, the Commission has assessed the plans of Slovenia and Lithuania. Further assessments will follow in the coming days. This is an important step towards disbursing funds under the Recovery and Resilience Facility (RRF) to these Member States. This financing will support the implementation of the crucial investment and reform measures outlined in each Member State's recovery and resilience plan. The RRF will play an important role in enabling them to emerge stronger from the COVID-19 pandemic. The Commission assessed the plans based on the criteria set forth in the RRF Regulation. The Council will now have, as a rule, four weeks to adopt the Commission's proposals. The RRF – at the heart of NextGenerationEU – will provide up to €672.5 billion (in current prices) to support investments and reforms across the EU.

Both tranches attracted very strong interest among investors across Europe and the world. The transaction was more than 11 times oversubscribed and bids exceeded €170 billion. As a result, the Commission has obtained very favourable pricing conditions, building on the successful first NextGenerationEU issuance earlier this month and the excellent performance of the SURE programme. This second transaction follows the €20 billion 10-year bond that the Commission issued on 15 June 2021. The first bond was the largest-ever institutional bond issuance in Europe, the largest-ever institutional single tranche transaction and the largest amount the EU has raised in a single transaction. The Commission has so far raised €35 billion under NextGenerationEU.

At 117.0 (EU) / 117.9 (EA) points, the ESI has by far outstripped its long-term average and pre-pandemic levels, hitting a 21-year high. The Employment Expectations Indicator (EEI) also increased markedly (+1.2 points to 111.5 in the EU and +1.6 points to 111.6 in the euro area), bringing it to the highest level since November 2018 in both areas. In the EU, the ESI’s increase was propelled by improving confidence in the services sector, but all other surveyed business sectors (i.e. industry, retail trade, construction) and consumers recorded an improvement, as well. At the country level, the ESI reached an all-time high in Germany (+5.0) and increased also in Italy (+2.1), the Netherlands (+1.9), France (+1.3) and Poland (+0.2). Of the six largest EU countries, only Spain saw a slight decline (-1.1).

Almost half of EU companies say they are planning to cut investment in the aftermath of the Covid pandemic. Werner Hoyer, President of the European Investment Bank (EIB) explains that the pandemic has made investment decisions "more complicated" and it is "a big concern" for "Europe's competitiveness and role in the world". To stimulate investment, InvestEU is taking on some of the financial risks for investors by guaranteeing 26 billion euros from the EU budget and 7 billion from partner banks. This will help to mobilise around 370 billion euros in public and private financing. The money will go towards projects that contribute to innovation and going digital, support SMEs (particularly those hit hard by the COVID crisis), foster social inclusion and boost sustainable infrastructure. At least 30% of all the investments must contribute to building a greener Europe. The European Commission is working in partnership with the European Investment Bank, as well as other national promotional banks and international financial institutions. From July 2021 onwards, InvestEU will replace the European Fund for Strategic Investment (EFSI), also known as the Juncker Plan, which successfully generated more than 500 billion euros in extra investment.

Twenty-one Member States as well as Norway, Iceland and Liechtenstein had already started to issue certificates ahead of the 1 July deadline, and five EU countries started on 1 July. The Commission's work on the EU Digital COVID Certificates was led by Commissioner Didier Reynders in close cooperation with Vice-Presidents Vera Jourová and Margaritis Schinas and Commissioners Thierry Breton, Stella Kyriakides, and Ylva Johansson. The aim of the EU Digital COVID Certificate is to facilitate safe and free movement in the EU during the COVID-19 pandemic. All Europeans have the right to free movement, also without the certificate, but the certificate will facilitate travel, helping to exempt holders from restrictions such as quarantine. The EU Digital COVID Certificate will be accessible for everyone. It covers COVID-19 vaccination, test and recovery; is free of charge and available in all EU languages; is available in a digital and paper-based format; and is secure and includes a digitally signed QR code. The Commission has also committed to mobilising €100 million under the Emergency Support Instrument to support Member States in providing affordable tests.

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