MNI: Italian Push For NGEU Extension Hits Resistance-Officials
Some officials think Defence Bonds may be the next big joint borrowing project for Europe.
An unofficial push by Italy to persuade the rest of the European Union to extend its EUR807 billion NextGenerationEU post-Covid investment programme beyond its 2026 deadline is running into stiff opposition from both the Commission and the so-called “frugal” bloc of states.
“It is a debate that is continuing but there are no points of arrival at the moment,” an Italian official said. All states would have to agree to any extension of NGEU.
An official in Brussels confirmed the discussions.
“That kind of talk is certainly going on but there is concern at the Commission that governments may relax if it is announced now,” the official said.
Another source noted that some fear that any extension would undermine the chances of agreeing an NGEU2 successor programme, and of joint European borrowing more generally, by highlighting the failures of the current package.
EXTENSION OR NGEU2
According to the Italian official, talks are moving towards a proposal for countries to be able to choose between extending their existing NGEU programmes or opting for funds from an NGEU2. An extension of the existing programme would be more in keeping with the temporary and exceptional conception of NGEU, which was a response to the economic impact of Covid, the official said.
But the frugal states plus Germany are adamant that an extension should not be countenanced, with one frugal finance ministry source dismissive.
“It’s never been officially discussed, and it doesn’t stand a chance,” the source said.
Divisions were stark at a meeting earlier this week to prepare the agenda to the April 12 EU finance ministers’ gathering in Brussels for a mid-term review of NGEU and its associated Recovery and Resilience Facility. The talks “fell apart”, the frugal source said, with some countries calling the Commission’s review “unbalanced” and “overly positive”.
The frugals wanted the text of the review to spell out that NGEU was a one-time spending programme and not to be repeated.
The lack of an agreement on whether NGEU has been a success or not is a massive hurdle to backers of a successor programme, including the Commission and the EU’s Belgian presidency, which had hoped to use its six-month term to push for new joint borrowing. (See MNI: Italy Fears EU Retail Bond Could Sap BTP Demand-Officials)
DEFENCE BONDS
Finding a new and urgent purpose for common EU financing, like defence, could be a more politically viable proposition, officials in Brussels said.
The March 20-21 EU summit asked the Commission to prepare a report on options for financing an EU defence upgrade by June, although the leaders of Germany and the Netherlands pushed back against calls by France for a EUR100 billion defence bond, which had support from the Belgian presidency as well as from countries near Russia.
It is unlikely that there will be a concrete proposal for defence bonds to be discussed by either leaders or finance ministers before June 6-9 elections to the European Parliament, the Brussels official said, though the matter is likely to be considered in “some shape or format.”
“The defence bond conversation is intensifying,” an official said. “It is definitely on the radar as a topic of high interest.”
Many EU officials believe its time will come soon, given the threat posed by Russia’s invasion of Ukraine and EU fears that U.S. support for the war may falter.