Brussels, 27 June 2023
To continue to finance the EU recovery via the NextGenerationEU instrument, provide support to Ukraine and secure funds for other key programmes, the European Commission plans to issue €40 billion in long-term EU-Bonds in the second half of 2023.
The funds raised will be used to meet payments related to NextGenerationEU; support to Ukraine under the EU’s Macro-Financial Assistance + programme; and any additional payment needs that may arise from other existing EU programmes, such as the European Financial Stabilisation Mechanism (EFSM) and Macro-Financial Assistance (MFA).
The Commission will continue to issue bonds under its unified funding approach and using the single EU-Bonds brand. The Commission established this approach in December last year in an effort to consolidate its market presence and further advance in its transformation towards a sovereign-style issuer.
Combined with the successful execution of the funding target in the first half of the year (€80 billion), the funding over the second half of 2023 will take EU issuances in 2023 to an amount of €120 billion– matching amounts in 2022. The Commission’s funding target for the remainder of the year reflects the expected disbursements needs of various beneficiaries, notably EU Member States under the Recovery and Resilience Facility (RRF). Currently EU Member States are finalising the reshaping of their Recovery and Resilience plans (RRP) to reflect the new grant allocations, request additional loans or adjust to new priorities, including REPowerEU. Disbursements under the Recovery and Resilience Facility are hence expected to rebound in 2024.
Commission issuances will also continue to include NextGenerationEU Green Bonds to finance the green component of the RRF. In doing so, the Commission will remain diligent in verifying that the proceeds from the NextGenerationEU Green Bond issuance match with eligible green bond expenditures in accordance with the NextGenerationEU green bond framework.
To further boost the secondary market liquidity of EU-Bonds, the Commission is preparing a framework for providing investors with pricing quotes on electronic platforms for EU securities to come into effect before end of 2023. The Commission is also starting to build a facility to support the use of EU-Bonds as an instrument in repurchase agreements, a development the Commission expects to implement by early 2024.
As part of the review of the EU’s budget framework for the period 2024-2027, the European Commission proposed on 20 June the Ukraine Facility. This dedicated financing instrument will provide coherent, predictable and flexible support for Ukraine from 2024 through to 2027, including in the form of of loans over the period (at an indicative level of €33 billion). If the proposal is adopted, its impact on the funding volumes of the European Commission will be reflected in forthcoming semi-annual funding plans.
Background
The European Commission is borrowing on international capital markets on behalf of the European Union and disbursing the funds to Member States and third countries under various borrowing programmes. EU borrowing is guaranteed by the EU budget, with contributions to the EU budget being an unconditional legal obligation of all Member States under the Treaties.
Since January 2023, the European Commission is issuing single branded EU-Bonds rather than separately labelled bonds for individual programmes. The proceeds are then allocated to relevant programmes according to the procedures set out in the applicable agreements.
On the basis of EU-Bonds raised since mid-2021, the Commission has so far disbursed €153.38 billion in grants and loans to the EU Member States under the Recovery and Resilience Facility, on top of further support to other EU programmes benefitting from NextGenerationEU funding.
The Commission has also disbursed €9 billion to Ukraine under the Macro-Financial Assistance + programme. This programme – of €18 billion for the full 2023 – follows the disbursement of €7.2 billion in emergency MFA loans to Ukraine in 2022. Prior to that, the EU had provided over €5 billion to Ukraine through five MFA programmes since 2014.
Under the Macro-Financial Assistance (MFA) programme, the EU provides medium/long-term loans or grants, or a combination of these, to partner countries experiencing a balance of payments crisis. MFA beneficiaries include Albania, Bosnia-Herzegovina, Georgia, Jordan, Kosovo, Moldova, Montenegro, North Macedonia, Tunisia, Ukraine.
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EU borrowing is gradually becoming an essential element of the EU funding toolbox. In the second half of 2023, we will continue to consolidate our market presence via regular issuances, while working to further develop our infrastructure and increase liquidity.