MNI EXCLUSIVE: EU, Member States To Coordinate Borrowing

Bond issuance to fund the EUR750 billion NextGenerationEU recovery programme will likely commence in July once national ratifications of key legislation clear the way, an EU source said, adding that the bloc will coordinate with national borrowers to avoid crowding the market.

"Seven countries so far have completed ratification and others are well advanced in terms of their preparation," the source said.

The European Commission is in constant contact with governments and with national parliaments to ensure that the ratification process goes as smoothly as possible and allows borrowing to get underway early in the second half of this year, the source said.

"We see ratifications completed by end of June, so allowing borrowing to proceed in July. That's the best scenario," the official said, adding that while delays could not be ruled out, no serious political obstacles now stand in the way of approval.

The EU is currently working on a framework for green issuance, which will account for 30% of the NGEU programme. The framework will address reporting requirements for green bonds amongst other things.

National Recovery Plans thus far submitted have "a lot of good projects which meet the EU's Green Deal goals," the source said.

COORDINATION WITH NATIONAL BORROWERS

Two more upcoming EU issuances for its SURE unemployment support scheme are expected in coming months. Other member states are expected to join the 15 already enrolled in SURE.

For the NGEU borrowing programme the EU intends to coordinate closely with big national borrowers to optimise issuance and borrowing terms.

"We are carefully preparing the ground and have to take into account that the big member states are also issuers so we must be in coordination with them – in fact we want to support and strengthen them – there were concerns about competition between issuers, but coordination makes sense in terms of establishing a Safe European Asset and also strengthening the role of the euro".

Thirteen percent of the total EUR750-billion NGEU programme will be frontloaded, and this portion is likely to account for most of this year's borrowing. Disbursements to member states could however amount to more than the amount to be borrowed, since funds could be mobilised from the EU Cohesion Fund and React-EU, the official said,

"That could mean quite substantial amounts of money being disbursed already this year".

The source said that the low level of take-up by member states for the loan element of the NGEU Recovery Fund was not regarded as a long-term problem.

"We are very relaxed on that because, once the grants component has been sufficiently used by member states over the first one or two years, the loans will be seriously and concretely used because we can offer loans on such very good terms and conditions".