Stimulus fund faces new hurdles with first disbursements – EURACTIV.com
The European Commission may find it difficult to transfer the first tranche of recovery funds to all member states according to its schedule, as most plans are expected to be approved at the same time and the ability to borrow in the markets will be limited.
Last July, the EU’s € 800 billion recovery fund was hailed as a landmark deal. But its slow implementation, doubts about its size, ratification problems in some member states, notably Germany and Poland, and difficulties in drawing up national recovery plans have tarnished the instrument.
At every step of the process, Europeans find new obstacles to its rapid implementation, as this could only happen after the fund is ready to make the first transfers.
If the planned timetable were to be respected, the European Commission would not have sufficient funds to make the first transfer of 13% of the total amount allocated to each Member State, once the Commission and the Council have validated the national reform plans. and investment, most of which will arrive in Brussels at the same time.
If the process goes as planned, transfers are expected to begin in the second half of July.
Budget Commissioner Johannes Hahn said on Wednesday April 14 that around 45 billion euros would be needed to cover the 13% pre-financing – the amount corresponding to non-repayable grants.
Hahn added that the Commission could raise in the markets between 15 and 20 billion euros per month to finance the fund, or about 150 billion euros per year until 2026.
Spain and Italy alone, as the main beneficiaries of the fund, would already absorb nearly 20 billion euros in grants.
The assessment of the national plans should have been completed in July, as the Commission needs two months and the Council an additional month from the end of April deadline for the submission of projects. By the summer, the EU executive also expects the process of ratifying the stimulus fund to be completed in all member states.
However, the blessing of member states for the fund could be further delayed, depending on the German Constitutional Court’s assessment of the European recovery.
So far, a total of 17 Member States have approved the EU own resources decision, which will allow the Commission to borrow the € 800 billion.
The difficulties in meeting the pre-financing needs of capitals could be further complicated if countries also apply for the loans on offer, as the Commission encourages to do so to benefit from its good financing conditions.
In this case, the amount needed would double if all countries take advantage of these cheap loans, as they can ask for 13% upfront.
Despite this, Hahn told reporters that the first payments “should be manageable.” If there are not enough resources for all the pre-financing requested, Member States will go their separate ways and receive payments in July and September, as in August the markets enter a summer freeze.
Since most countries can end up sending their plans at the same time, Hahn explained that the decision of who gets the money first will be based on merit, i.e. who gets the highest score. in the Commission’s assessment of the national project.
Although member states are due to submit their stimulus packages by the end of the month, an EU source explained that the legislation called for April 30 “as a rule” and that some capitals could therefore send in their proposals. investment and reforms beyond this month.
“Quality is the most important thing,” the European source added, warning that not all member states will meet the deadline.
To date, no EU country has yet submitted the stimulus package. The most advanced countries are Spain, Greece and Portugal.
This flexibility of the schedule would make it possible to avoid bottlenecks during the first disbursements. Nonetheless, Hahn told reporters that the Commission’s mechanism would be ready by the end of June and could start borrowing in the markets in July if needed, once the first plans are approved and the stimulus fund is ratified by all 27 states. members.
A second EU official added that the on-going preparatory work and the diversified funding strategy presented on Wednesday is aimed “precisely at avoiding a scenario in which funds are insufficient to meet the pre-financing needs of grants and loans”.
[Edited by Zoran Radosavljevic]