EPRS Admin By / September 14, 2021

Overview of the recovery plan for Europe

Overview of the recovery plan for Europe, € billion, current prices

Overview of the recovery plan for Europe, € billion, current prices

The recovery plan for the EU is worth €2.018 trillion (current prices) and consists of two parts: the multiannual financial framework for the years 2021 to 2027 (MFF), and the ‘Next Generation EU’ (NGEU) European recovery instrument for the years 2021 to 2023 (Figure 1). In both cases, the time frame concerns the period for making legal commitments giving rise to expenditure. While the MFF ensures financial predictability for investments and means to implement various EU policies in the medium and long term, the NGEU is a key, temporary, short-term instrument, addressing the consequences of and challenges posed by the Covid-19 pandemic.
As well as covering different periods of time, the MFF and NGEU differ in their sources of financing. The MFF is financed from the EU’s own resources. Most (70 %) comes from direct payments from the Member States’ national budgets, calculated on the basis of gross national income (GNI). The rest is from customs duties, contributions based on value added tax (VAT) collected by the Member States, and since 2021, from a national contribution based on non-recycled plastic packaging waste. NGEU, however, will be financed from money borrowed by the Commission on behalf of the EU on the international capital markets. The first borrowing operations, conducted in mid-2021, allowed the raising of €45 billion in total, out of €80 billion planned for the year. Then, as of 2028 and by 2058 at the latest, NGEU should be repaid from the EU’s own resources (the EU budget will repay the grants and their borrowing costs, while the Member States that have taken loans will be responsible for their repayment). To help repay the borrowing, new sources of revenue for the EU should be in place by that time. Therefore, according to a roadmap agreed by the European Parliament and the Member States, the Commission is to put forward concrete proposals on new own resources in 2021 and in 2024. The list of possible options includes revenue linked to a carbon border adjustment mechanism, a digital levy, the EU emissions trading system, a financial transaction tax, a financial contribution linked to the corporate sector and a new common corporate tax base.

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