BRUSSELS (Reuters) – The European Commission is likely to tap financial markets in “late spring” to finance pre-payments for 27 national plans for recovery from the pandemic, seeking to borrow tens of billions of euros, European Economic Commissioner Paolo Gentiloni said.
February and March would be key months for the Commission’s assessment of how each of the 27 EU governments wants to spend its share of the EU’s 750-billion-euro recovery fund, which will then be validated by EU finance ministers, he said.
“At the end of this process, the country (that presents a draft spending plan) receives 13% of the overall plan that is presented,” Gentiloni told Reuters Breakingviews.
“This means that in late spring, the Commission will go to financial markets to raise this money… with the goal of disbursing the pre-financing of this 13% to each country with an approved plan,” he said in an interview.
Only 70% of the 750 billion total recovery fund has been allocated to each country for now, with 30% to be allocated in 2022 once the impact of the pandemic is better known.
The Commission can seek to finance 13% of the already allocated total, officials said, which could amount to almost 70 billion euros, providing governments bid for their full share of both loans and grants.
After the pre-financing, disbursements would continue as projects outlined in the programmes reach agreed milestones and targets — a condition that will be assessed by the Commission before each new payout, Gentiloni said.
To get the spending plans approved, governments have to make sure the money goes toward making their economies greener and more digitalised, to reduce administrative red tape and to address country-specific problems the Commission has pointed out in its individual recommendations.
So far, 17 EU countries have sent draft spending plans for discussion on how well they match the criteria, before they are formally submitted at the end of February or in March.
“We still have a lot of work ahead of us to translate that into goals, targets, milestones and commitments,” Gentiloni said.
Italy is the greatest beneficiary of the recovery fund with a 209-billion-euro share, but government turmoil in Rome has raised questions of how it would prepare a programme that would get EU approval. Gentiloni said the Italian draft plan needed to be “strengthened”.
“We need especially two things: the first is to have clear messages on reforms communicated by the Commission in the country specific recommendations issued in 2019 and the second is that we need details on the timing of the projects,” he said.
To help governments deal with the economic fallout of the pandemic, the EU has suspended until the end of 2021 its budget rules that require annual deficit and debt reductions.
Gentiloni said EU executive and finance ministers would discuss “before the summer” when the EU would be ready to return to applying the rules, which the EU executive is also reviewing to see how they could be improved.
(Reporting by Jan Strupczewski; Editing by Bernadette Baum)