The European Commission has announced its first NextGenerationEU transaction. The EC raised EUR 20 bn via a ten-year bond due on July 4, 2031, to finance Europe’s recovery from the SARS-CoV-2 coronavirus crisis and consequences of the COVID-19 pandemic.
This is the largest-ever institutional bond issuance in Europe, the largest-ever institutional single tranche transaction and the largest amount the EU has raised in a single transaction.
All EU Member States approved their own resource decision. As a result, the European Commission was able to start raising funds to finance the Recovery Fund.
The EC announced in early June that in 2021, it will issue long-term bonds worth around EUR 80 bn, which will be complemented with short-term Eurobills to cover the remaining financing requirements.
The final amount of EU bonds and EU bills will depend on the financing needs, which the Commission will assess in more detail in autumn. In this way, the EC is to be able to finance in the second half of the year all planned subsidies and loans for member states under the Recovery Fund and EU policies.
The financing plan is based on preliminary estimates of the loan and grant needs of the Member States. In September, the Commission will update it, having a more accurate picture of the financial needs of EU Member States in the last months of this year.
To finance the Recovery Fund, the EC on behalf of the EU, will borrow up to EUR 750 bn in capital markets at 2018 prices. This will translate into an average loan volume of around EUR 150 bn per year between mid-2021 and the end of 2026 r., which will make the EU one of the largest issuers of euro-denominated debt.
In September 2021, the Commission also intends to start issuing Eurobonds and EU bills through an auction. After the auction system is launched, the Commission will issue bonds on a regular basis. In addition, it will organise regular eurobone auctions.
“Today is a truly historic day for our European Union. We successfully conducted the first funding operation for NextGenerationEU. As a strong Union, we are raising money at the markets together and investing in a common recovery from this crisis. It is an investment in our single market. And even more importantly, it is an investment in the future of Europe’s next generations as they face the challenges of digitisation and climate change. Money can now start flowing to help reshaping our continent, to build a greener, more digital and more resilient Europe. I will now visit every Member State, to see the NextGenerationEU impact on the ground,” Ursula von der Leyen, the head of the European Commission announced on Tuesday.
Today we reached a key milestone in implementing our recovery plan #NextGenerationEU.— Ursula von der Leyen (@vonderleyen) June 15, 2021
We have successfully conducted the first fund-raising operation.
The @EU_Commission has raised €20 billion with strong interest from investors worldwide. https://t.co/2236kKSa7E