The European Union is finally ready to raise much-needed funds from public markets and boost the economies of its 27 members after the severe shock from the coronavirus crisis, APA reports citing CNBC.
The bloc took an unprecedented decision in July to jointly raise capital to fund the economic recovery — a fiscal effort worth 750 billion euros ($917 billion). This stimulus is on top of what the individual governments have already deployed in the wake of the pandemic.
Now that all the legislative steps have been taken, the European Commission is able to tap capital markets in search for those funds as early as this month.
“The European Commission is ready to go to the markets to raise money to make [the] EU greener, more digital and resilient,” President Ursula von der Leyen said on Twitter.
The institution said Monday that 38 financial institutions will be primary dealers, including France’s BNP Paribas, Germany’s Deutsche Bank and Italy’s UniCredit.
The 27 EU capitals will receive a first disbursement of 13% of the total amount that’s been allocated to them in the coming months. Future payments will depend on whether countries implement the necessary reforms.
This is why member states have put forward recovery plans outlining how they will be using the money and how they will be making their economies more competitive.
However, these documents are still being reviewed by the European Commission and must be scrutinized one final time by the member states. The EU’s executive arm intends to conclude its assessment in mid-June, and member states will then have one month to give their opinion on each other’s plans.
Some member states, such as Portugal, are pushing for the entire review process to be concluded by the end of June.
“It’s a truly historic moment for Europe: The beginning of large-scale common borrowing, even if it is a temporary program,” Erik Nielsen, chief economist at UniCredit, told CNBC via email.
“The actual borrowing — and disbursements — will not be an issue. The potential hurdles will more likely emerge in the implementation phase of the reforms and investments — but that’s normal for anything big and ambitious,” he said.
The European Union’s economy contracted 6.1% in 2020 and is expected to rebound by 4.2% in 2021, according to data from the European Commission.
Peripheral yields in the euro zone were lower on Tuesday morning.