MNI: EU Paper Flags Savings From Rolling Over NGEU Debt
MNI (BRUSSELS) - Extending repayment of the European Union's EUR800 billion NextGenerationEU post-pandemic recovery programme beyond 2058 would significantly ease the fiscal burden on the EU’s next long-term budget for 2028-2034, according to a European Parliament Budget Committee paper seen by MNI.
Member states are currently obliged to provide between 0.07% and 0.043% of GDP to service NGEU debt or alternatively avoid the need to cut EU spending by a similar amount, though there would be a slight increase in interest payments over the 2028-2034 period, according to the paper, which floated the idea of instead rolling over the debt and postponing principal repayments until later budgets.
While rolling-over EU debt would require political consensus and a unanimous decision by member states to amend NGEU regulation, the European Commission needs to find ways to increase spending on the green and digital transitions as well as on defence in its next Multiannual Financial Framework. Work on the long-term budget proposal, which will be presented in the summer of next year, is due to begin shortly.
ACTIVE MANAGEMENT
The paper, requested by the Committee from EU think tank Bruegel, comes as the Commission is already considering rolling over some of the debt used to provide more than EUR338 billion in grants under NGEU, officials have told MNI, though they stressed that the EU remains committed to repaying all the programme’s borrowings by 2058. (See MNI: EU Commission To Decide On Rolling Over Some NGEU Debt)
Another way to ease the EU’s financial burden would be "active debt management" the paper said.
"Active debt management could help to smooth or even reduce the interest burden. For example, the EU could issue long-maturity bonds and buy back higher-yielding short-maturity bonds if there is an unexpected decline in long-term interest rates or increase its liquidity buffer with bills if short-term interest rates fall unexpectedly."
During the period of the 2028-2034 budget, according to calculations in the paper, payments on NGEU interest and principal repayment are set to total from EUR168-140 billion depending on different repayment scenarios.