The EC plans annual borrowing of 150 billion euros

15.04.2021. / 9:30

BRUSSELS – The European Commission plans to borrow about 150 billion euros a year by 2026, to finance its largest program ever for a “greener” and more digitalized 27-member bloc, which will make it the largest issuer of debt in euros, the Commission announced.

Photo: Freepik

The EU’s economic plan was agreed in the amount of 750 billion euros at 2018 prices, but at current prices it amounts to a total of 807 billion euros, Reuters reports.

Of the total amount of money, 338 billion euros are planned for grants, and 386 billion for loans for 27 EU countries, while the rest is intended for other joint EU programs. The funds will be distributed over the next five years, with a third being spent on reducing carbon emissions in the 27 EU economies.

Each of the member states of the Union can receive 13 percent of the money from its share in pre-financing this year.

If EU governments focus this year on the pre-financing grant component, EU borrowing in the third quarter could amount to about 45 billion euros, said European Budget Commissioner Johannes Hahn.

The commission announced that it will issue bonds with a maturity of three, five, seven, 10, 15, 20, 25 and 30 years and treasury bills with a maturity of one year.

Borrowing will begin as soon as all 27 EU national parliaments ratify the EU’s own resources decision, a law that increases EU government guarantees from 1.4 percent to 2.0 percent of gross national income (GNI) by 2058.

Our structures will be ready by June and theoretically we could start borrowing, but that depends on the speed with which the member states will complete the ratification process.Said Han.

Ratification of that law is necessary because the guarantee of the EU budget will enable the Union to borrow at the lowest possible interest rates on the market.

This is only a security measure, as loan repayments should be serviced by the new taxes that the EU will agree on in the coming years, and not from national budgets. The repayment is expected to begin in 2028 and last until 2058.

The loans will be repaid by countries that receive loans and grants from the EU budget from the money collected from taxes that have yet to be agreed.

The Union is planning new taxes on imports of goods from countries deemed to be less compliant with stringent CO2 targets, new tariffs on CO2 emissions in the transport sector, as well as a digital tax. It also plans a financial transaction tax and a financial contribution related to the corporate sector, ie a new common corporate tax base.


Source: Capital.ba – Informacija je capital by www.capital.ba.

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