MNI: NGEU Extension Debate To Be Linked With EU Budget Dossiers
Officials across the EU are looking at whether - and how - the pandemic era NGEU can be extended past 2026.
EU officials are already thinking through ways in which its Next Generation EU Covid recovery instrument can be kept alive after its 2026 termination date, despite objections from net contributors to the EU budget like Germany and like-minded ‘frugal’ member states, EU and Italian sources told MNI.
With the Commission obliged to make a proposal for its next long-term budget by June 2025, what happens to NGEU 1.0 will quickly become a relevant, if politically difficult, issue. The need to provide significant additional funding for new strategic priorities like defence and the green and digital transitions is injecting urgency into the debate.
“Work has already started (on the EU’s 2028-34 Multiannual Financial Framework). Some internal exchanges are already taking place within the different departments of the institution,” a Commission spokesperson said.
The EU’s recent Annual Budget Conference demonstrated how the concept of NGEU as more than a one-off intervention is on the minds of top officials, although the debate is likely to be complex. EU Budget Commissioner Johannes Hahn told the conference that repayments of the EUR800bn NGEU borrowing programme – due to start in 2028 – could be slowed down or even suspended in order to free up resources for both the EU budget and for member states, although he conceded the idea would face serious legal constraints.
As one ‘frugal’ source said of Hahn’s proposal, “interesting … but still needs unanimous changes in legislation, I think. No appetite for that.”
LOW ABSORPTION RATE
Linked to that discussion is the increasingly pressing problem of what to do about the low absorption of NGEU funds in countries like Spain and Italy, the two biggest net recipients. Hungary has yet to receive a single euro under the programme, underlining how improbable the 2026 deadline is.
“Something will have to be done,” said one EU official, “although discussion will not get really serious until late next year as the deadline becomes imminent and focuses minds.”
Italy has already taken steps to address the low absorption rates. “We predict a bigger disbursement and economic plan for the rest of the plan, but there is the risk that some delays can pile up,” the source said, arguing that some sort of flexibility to finish the plan would be welcomed.
Officials say discussion of extending NGEU beyond 2026 has not reached a formal level and is more confined to corridor chat for the moment. Given that the current Commission only has months left in office it will be up to the newly-appointed executive following next month’s European Parliament elections to come up with ideas.
Given the legal difficulties of an official extension, some believe an ad hoc approach might eventually be adopted, probably brought in by “stealth,” another Brussels source said.
“It may be in the interest of several countries to have a bit more time to complete (their NGEU investments and reforms) so more probably it will be a question of how to interpret the end of a project … You could arrive at a definition which focuses more on commitment rather than disbursements,” the same source said.
ROMAN VIEW
Italy, the biggest beneficiary of the plan, has already received EUR 102.5 billion of its nearly EUR200 billion due, but has only spent EUR 43 billion through December 2023. Prime Minister Giorgia Meloni -- who will run at her ruling party Brothers of Italy’s lead candidate in the June European Parliament elections -- will highlight the topic while campaigning as a way to show that her approach of combining toughness and pragmatism in Brussels benefits Italy.
But the Italian government is divided on whether Rome should lead the political push alongside Madrid for an extension of NGEU or hold fire until it becomes obvious NGEU will need to be extended to avoid some projects being left half-finished, an Italian official told MNI. (See MNI: Italian Gov't Divided Over Push To Extend NGEU -Officials)
Rome sees Hahn’s proposal as a “first step” to opening the debate on the fate of NGEU.