MNI EXCLUSIVE: EU Officials See Covid Fund Payments On Time

European Union officials remain confident that agreement can be reached soon on their EUR750 billion Covid-19 rescue package, they told MNI, dismissing reports that European Parliament demands for disbursements to be made conditional on adherence to the rule of law could mean no funds are disbursed until the end of 2021.

"The aim remains to definitely get the RRF up and running ASAP," one official said, referring to the Recovery and Reconstruction Fund agreed by member states at a crunch summit in July. Calls in the parliament for conditions which could block payments to countries such as Hungary and Poland could be dealt with and approval obtained by the end of the month, the official said.

"There is no doubt, some countries are taking all elements of the package hostage in order to get what they want," one source said. "On the other hand, everyone realises it's an emergency."

Spanish newspaper El Pais cited sources on Monday saying that funds from the EU's Next Generation recovery and transition programme may not be available before the end of next year, well after the current schedule for 10% of the money to be front-loaded from early 2021 and for money to be committed to national recovery plan projects by the summer. But officials said the plan was still for payments to be made according to the original timeline.

In the event of a delay to the RRF / Next Generation programme, or more importantly, should the Covid-19 pandemic prompt further economic disruption, there is no scope for the extension of any existing emergency EU aid, such as the SURE unemployment support scheme, officials said. Countries' own spending, facilitated by European Central Bank bond buying, would be the "only alternative" to further prop up their economies, one EU source said.

"SURE is an emergency measure but who really needs that at current yields?" the official said, adding that countries had more room for additional fiscal spending thanks to the waiver on tough rules on debt included in the eurozone's Stability and Growth Pact, which "is not going to be reinstated for a long time."

NATIONAL FISCAL EFFORTS KEY

The European Central Bank's EUR1.35 trillion Pandemic Emergency Purchase Programme is keeping government borrowing costs at low levels, officials noted. ECB Executive Board member Isabel Schnabel said earlier this week that governments should not worry about their indebtedness for now.

Officials also noted that national fiscal efforts would in any case have a far greater impact than that provided by the EU's Recovery Fund, whose fiscal stimulus of EUR360 billion in loans and EUR312.5 billion in grants will be divided between 27 countries over several years.

But with the virus still seemingly raging across Europe, officials say they will continue to review and monitor how support measures are working out.

"The aim is regularly to take stock of the situation and how the measures are being implemented. A (Eurogroup) discussion could be expected at the next meeting (Nov. 3)," a source said.