The Austrian and Polish parliaments were on Thursday the last of the European Union’s national legislatures to ratify the €750 billion ($913 billion) “NextGenerationEU” post-COVID-19 pandemic recovery plan, which will see the 27 member states jointly borrow on capital markets for the first time in the EU’s history.
- The European Commission — the EU’s executive branch — is now pressured by some member governments to start tapping the markets as early as June, before the quiet bond market summer season, and start disbursing the funds without waiting further. Repayments of the bonds issued by Brussels are expected to be spread over the 2028-2058 period.
- The aid will be extended in priority to the countries most affected by the pandemic, with Italy and Spain due to receive together more than 40% of the total €340 billion of grants, the rest of the overall program taking the form of loans to national governments at privileged rates.
- The EU budget will guarantee the massive borrowing effort, leading some analysts to salute Europe’s “Hamiltonian moment” — a reference to the first U.S. Treasury Secretary, who brokered a deal in 1790 to let the new federal government take on liabilities for the war debts of former colonies.
The outlook: The plan is finally set in motion, 10 months after EU leaders agreed on its principle following fierce debates last year. Critics have contrasted the bureaucratic, political and legal delays to the 48 days it took U.S. President Joe Biden, after his inauguration, to see Congress approve his $1.9 trillion stimulus plan.
But European officials note that the European program wasn’t meant to counter the immediate impact of the COVID-19 pandemic. It is intended to boost long-term investment, with priorities on climate change and clean energy, the digital transition, as well as education and training.
The European Commission will now have to approve the 27 national recovery plans submitted by national governments, but could in theory start disbursing funds before summer.