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EU Financing / Budgetary Affairs, PUBLICATIONS

Next Generation EU: A European instrument to counter the impact of the coronavirus pandemic

Written by Alessandro D’Alfonso,

© European Union, 2020

The socio-economic impact of the coronavirus pandemic across the European Union (EU) is posing significant challenges, not least to the good functioning of the single market and the euro area. This has led to a growing consensus on the need for a common recovery plan to complement national stimulus packages. The European Commission has put forward a proposal to establish a €750 billion European recovery instrument, Next Generation EU, to reinforce the EU’s 2021-2027 multiannual financial framework (MFF). The instrument would be financed from funds borrowed on the markets by the Commission on behalf of the EU, while a mix of new and already planned instruments under the EU budget would channel expenditure, combining grants (€500 billion) and loans (€250 billion). The proposal, which aims to focus on the geographical areas and sectors hardest hit by the crisis, seeks to ensure an economic rebound that is also about quality, since expenditure is to be in line with jointly agreed EU objectives such as the green and digital transitions. National allocations under the largest instrument, a new Recovery and Resilience Facility, are to address challenges identified in the context of the European Semester. The recovery instrument includes various proposals in which the European Parliament is involved to varying extents, depending on the issue at stake. The channelling of resources through the EU budget means that Parliament would be co-legislator of relevant spending instruments, and exercise democratic scrutiny of expenditure through the discharge procedure. The budgetary authority would not however determine annual expenditure of Next Generation EU in the budgetary procedure since financing would be based on external assigned revenue. The Commission has called for an agreement to be reached in July 2020, in order for the recovery instrument to be operational as of 2021. A €11.5 billion bridging solution would address some objectives already in 2020. Elements expected to be at the heart of the complex negotiations, which are linked to those on the 2021-2027 MFF, are: the size of the instrument; the mix of grants and loans; the allocation of resources between Member States; reform of the financing system of the EU budget with new own resources; and the repayment of the borrowed resources.

Read the complete briefing on ‘Next Generation EU: A European instrument to counter the impact of the coronavirus pandemic‘ in the Think Tank pages of the European Parliament.

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