The project was bold, but they got there: When the pandemic hit people in Europe, the EU Commission took on large-scale debt on the financial markets for the first time. “Next Generation EU“She christened the pot set up in 2021, which has become known as the Corona reconstruction fund. It now contains 807 billion euros, financed by bonds, i.e. joint loans, which are to be paid from the EU budget between 2028 and 2058. So effectively from the Contributions that Europe’s governments send to Brussels.
This previously unique project is now likely to be significantly more expensive than previously assumed. Because the Commission made the calculation without the interest rate turnaround: The rise in interest rates was “far higher than could be expected when the Multiannual Financial Framework 2021 – 2027 was determined,” said the authority in response to a parliamentary question from MEP Moritz Körner ( FDP), which is available to the SZ. The original cost estimate is therefore “regarded as no longer sufficient”. Instead of 1.03 billion, 280 million euros more are now planned – an increase of 27 percent.
Member States and the EU Parliament negotiate the EU financial framework every seven years; it determines how much money the EU can spend. The institutions cannot go beyond it. But the Commission is very creative in reallocating funds within the framework. The money for the higher interest payments is therefore potentially missing elsewhere. “The costs for the reconstruction fund are already getting out of hand in the second year of their existence,” criticizes Körner. “The increased interest burden will further narrow the scope for future investments.”
The EU bonds were popular with investors from the start
This is the part of the money from the Corona Fund that the Commission distributes as grants to the Member States. 338 billion euros are earmarked for this. The Commission only has to budget for the interest burden for this expenditure itself; it gives the other part of the fund money as a loan to the EU countries, which has no effect on the budget.
The EU bonds were popular with investors from the start. Papers issued in the second half of 2022 and earlier this year were oversubscribed by 2.8 to 11 times, meaning demand was significantly higher than supply. Although the bonds are among the safest in the world, comparable to those of Germany, the rise in interest rates had a severe impact on them too. The Commission writes that this can also be observed in other euro countries with a high rating.
The disbursement of the funds has been sluggish so far, it is linked to clear conditions. The governments should pay more attention to the reform recommendations of the commission, at least 37 percent of the aid must be used for climate protection and 20 percent for digitization. The money will be paid out in stages, depending on whether the recipients achieve previously defined intermediate goals in the reform process.
