A separate proposal has been designed to create the European Union recovery instrument through a Council regulation, with a view to activating the empowerment to borrow. The proposed legal basis is Article 122 of the Treaty on the Functioning of the European Union (TFEU), which provides the EU with the possibility of establishing measures, decided in a spirit of solidarity between Member States, appropriate to the economic situation. The European Parliament is not involved in this legislative procedure, which requires a qualified majority in Council. Article 122 TFEU has already been used in the context of the immediate response to the coronavirus crisis to establish the European instrument for temporary support to mitigate unemployment risks in an emergency (SURE).
In practice, this Council regulation would be the basic act that would, based on Article 21(5) of the EU’s Financial Regulation (FR), generate the external assigned revenue (see box) for Next Generation EU and allocate the resources from the borrowing operations to a number of EU budgetary programmes. The text sets out the breakdown of resources by type of support, establishing that grants, financial instruments and provisioning for guarantees would channel two thirds of the resources through the EU budget while the remaining third would go to loans to Member States .