NextGenerationEU: European Commission to issue €50 billion in long-term bonds by June 2022 to finance the recovery
Following the successful start of borrowing to finance the NextGenerationEU recovery in June 2021, and in line with its strategy for open and transparent communication to financial markets, the European Commission has today announced its issuance plans to cover the funding needs under NextGenerationEU for the first half of 2022.
The plan foresees the issuance of €50 billion of long-term EU-Bonds between January and June 2022, to be complemented by short-term EU-Bills. On that basis, the Commission will continue to be able to cover all payments due under the Recovery and Resilience Facility and all other programmes under the NextGenerationEU recovery instrument over that period.
The current funding plan is based on the latest forecasts for forthcoming NextGenerationEU payment needs. Given that the Recovery and Resilience Facility – which accounts for 90% of payments under NextGenerationEU – is a performance-based instrument and that payments in 2022 will be conditional on the completion of the milestones and targets in Member States’ national Recovery and Resilience Plans, the precise funding needs and timings of payments may vary. Any changes will be communicated to the market in a timely and transparent way.
Today also marks the Commission’s adoption of the Annual Borrowing Decision for 2022. This decision includes the maximum amounts that the Commission is authorised to borrow by the end of the year.
Commissioner in charge of Budget and Administration, Johannes Hahn, said: “In 2022, the Commission will continue to raise funds to finance the recovery and build a better and more resilient future for all. With volumes of €50 billion in the first half of the year, we expect to retain a strong presence in the markets, helping Member States on their path to recovery as well as supporting capital market integration and the international role of the euro.”
Issuances in 2022 will build on the successful start of the NextGenerationEU recovery programme in 2021. Since June 2021, the Commission has raised €71 billion for NextGenerationEU via long-term EU-Bonds – €12 billion of which through the first ever NextGenerationEU green bond issuance. In addition, the Commission currently has around €20 billion in EU-Bills outstanding. On that basis, the Commission has paid €54.15 billion to EU countries as pre-financing under the Recovery and Resilience Facility and over €6 billion to other EU programmes which also receive NextGenerationEU funding. This has fully addressed all payment requests in 2021.
In 2022, the Commission intends to issue both conventional and NextGenerationEU green bonds, both via syndications and auctions. Short-term EU-Bills will continue to be issued exclusively via auctions. Following the successful roll-out of its auction programme in September, the Commission will further develop the use of auctions as an issuance format. The exact ratio between auctions and syndications will depend on the market conditions and the Commission’s exact funding needs.
The Commission will also continue to be present in the market in the context of its other financing programmes (the European Financial Stabilisation Mechanism, SURE and Macro-Financial Assistance), with an estimated funding volume over the period January to June 2022 of around €5.5 billion.
The Commission will announce its issuance plans for the second half of the year in June 2022.
Background
NextGenerationEU is a temporary recovery instrument of some €800 billion in current prices to support Europe’s recovery from the coronavirus pandemic and help build a greener, more digital and more resilient Europe.
To finance NextGenerationEU, the European Commission – on behalf of the EU – will raise from the capital markets up to around €800 billion between now and end-2026.
To raise the necessary funding under the best possible market conditions, the Commission has started to implement a diversified funding strategy.
This strategy relies on a mix of long- and short-term issuances via syndicated and auction formats to enable the Commission to raise funds flexibly and on the most advantageous terms under prevailing market conditions.
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Q&A diversified funding strategy
