750 Billion anti-crisis fund, the
Commission´s solomic bet

NEW RECOVERY FUND PRESENTED BY THE EUROPEAN COMMISION

In response to the ravages of the COVID19 pandemic, the European Commission (EC) has presented a recovery fund with a volume of 750 billion recovery fund, a pillar on which an anti-crisis plan is based that includes an unprecedented debt issue and the combination of non-reimbursable aid with loans, conditional on reforms that strengthen the health of the Old Continent’s economy.

As it happens in times of crisis, Europe seems to have two speeds and the visions of possible solutions to the current scenario are very different between those of the countries of the South and those of the North. In this plan of the Commission, to these 750,000 million (500,000 in subsidies and 250,000 in loans) are added the instruments already in place, although this fund will have to be negotiated and approved by all the Member States and the European Parliament to come into force.

If it goes ahead as the EC has proposed – anchored in a new budget for the period 2021-2027 that goes from 1.1 trillion euros to 1.8 – Spain would be the second most “benefited” European country, since 170,000 million would go to Italy and 140,000 to Spain (77,000 in subsidies and 63,000 in loans), although the final amount depends on the requests that our country presents.

This recovery instrument, called “Next Generation EU”, will boost the European Union’s budget with new financing achieved in the financial markets, issuing long-term debt with maturities between 2028 and 2058.

The fund has three objectives:

HELPING MEMBER STATES TO RECOVER

The actions will be implemented in the form of grants (310 billion) and loans (250 billion), applying it to national plans and in the framework of the European Mechanism and Resilience integrated into the European Semester and its objectives, with particular attention to the ecological and digital transitions. To this end, individual countries have to present their recovery plans and have them comply with the Commission’s economic recommendations.

REACT-EU – To promote recovery for the cohesion and territories of Europe by means of flexible subsidies from the cohesion policy for municipalities, hospitals and companies, through the managers of each State. With a budget of 55 billion additional funding from the Cohesion Policy between 2020 and 2022.

Supporting the ecological transition to a climate-neutral economy by strengthening the Just Transition Fund, up to 40 billion euros, and the European Agricultural Fund for Rural Development, with an increase of 15 billion, so that rural areas face the necessary structural changes in line with the European Green Pact.

SUPPORT PRIVATE INVESTMENT, USE THE NEW "SOLVENCY INSTRUMENT" AND BOOST ECONOMIC GROWTH

Providing an EU budget guarantee to finance investment projects through the European Investment Bank and national development banks. With a budget of ?15.3bn to reinforce the InvestEU programme. This initiative includes a new Strategic Investment Facility to be funded with $15bn from the Next Generation EU.It also includes a new tool to support business solvency by providing an EU budget guarantee to the EIB Group to mobilise private capital. This instrument has a budget of 31 billion and is expected to mobilise up to 300 billion in funding.

PREPARE FOR OTHER CRISIS

Within this plan, new programs are created, and others are reinforced, to increase their capacity to react and recover from possible pandemics.

Thus, a new Health programme, “EU4Health“, is born with a budget of 9.4 billion to strengthen health security, while reinforcing the “EU rescue” (civil protection mechanism) to respond to large-scale emergencies. This includes grants and public contracts managed by the Commission for a volume of EUR 3.1 billion.

The Commission has also proposed to reinforce other programmes to ensure that the challenges posed by the pandemic can be addressed. These include Horizon Europe, Connecting Europe, the CAP, the Neighbourhood, Development and International Cooperation Instrument and the Humanitarian Aid or the Digital Europe Programme.

 

This fund is an example of Europe’s willingness to respond strongly to the new crisis and complements the 540 billion credit plan approved in April and which is part of an emergency plan that is divided into the 240 billion credit lines of the MEDE rescue fund, the 100 billion to support the maintenance of SURE employment and the new 100 billion line of EIB guarantees to finance SMEs.

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