REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Half-yearly report on the implementation of borrowing, debt management and related lending operations pursuant to Article 12 of Commission Implementing Decision C(2022)9700 1 July 2022 - 31 December 2022
Date: 2023-02-22
Institutions: Directorate-General for Budget, European Commission
Subjects: EU aid, EU borrowing, EU financing arrangements, EU strategy, European Development Fund, bond, debt, economic recovery, financial management

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 22.2.2023  COM(2023) 93 final  REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Half-yearly report on the implementation of borrowing, debt management and related lending operations pursuant to Article 12 of Commission Implementing Decision C(2022)9700                          1 July 2022 - 31 December 2022                      
 
 
Table of contents 

1.  Introduction ......................................................................................................................................................................................... 1 

2.  Implementation of the NextGenerationEU borrowing operations in the second half of 2022 ........... 3 

3.  Cost of funding and liquidity balances ................................................................................................................................ 5 

4.  Other milestones in the second half of 2022 ................................................................................................................. 6 

5.  Implementing a unified funding approach ........................................................................................................................ 7 

6.  Other measures to enhance the investor appeal of EU-Bonds ............................................................................. 9 

7.  Issuance outlook for 2023.......................................................................................................................................................... 9 

8.  Conclusion ......................................................................................................................................................................................... 10 

EN 

  EN 

 
 
 
 
 
NextGenerationEU funding at 31 December 2022  

Conventional  

30-year tenor 

€19.0 billion 

20-year tenor 

€17.0 billion 

10-year tenor 
10-year maturity 

€34.9 billion 

7-year tenor 

€24.0 billion 

5-year tenor 

€28.2 billion 

3-year tenor 

€11.2 billion 

Green 
€5.0 billion 
 €7.0 billion 

25-year tenor 
20-year tenor 

€18.5 billion 

15-year tenor 

€6.0 billion 

10-year tenor 

Long-term borrowing  

EUR 171 billion EU-bonds 
of which EUR 36.5 billion green 

EU-Bills outstanding 

€17.0 billion 

           Short-term borrowing  

KEY FACTS of the second half of 2022 

  KEY FACTS of the second half of 2022 

•  4 syndications, 4 auctions, raising EUR 50 billion 
•  Average cost of funding 2.6% 
•  Syndications 2.8 to 10.9 times oversubscribed 

•  10 auctions 
•  Average yield 0.93% 
•  Bid-to-cover ratio of 2.23x 

Use of proceeds at 31 December 2022  

€93.5 billion

€45.2 billion

€23.9 bn(1)

Other programmes
under the EU budget

Recovery and Resilience Facility 
grants to EU Member States 

Recovery and Resilience Facility 
loans to EU Member States

KEY FACTS 
•  22 Member States received grants and loans under the Recovery and Resilience Facility.(2) 
•  11 Member States also received a disbursement due to their fulfilment of milestones and targets. 

(1) Budget available to Horizon Europe, InvestEU Fund, ReactEU, the Union Civil Protection Mechanism (RescEU), the 
European Agricultural Fund for Rural Development (EAFRD), and the Just Transition Fund. Actual disbursements to final 
beneficiaries may be lower, due to timing differences. 
(2) All Member States’ recovery and resilience plans have been approved.  

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1. Introduction  

The Commission is empowered to borrow on behalf of the European Union. It is a well-established 
name in debt securities markets, with a strong track record of successful bond issuances over the 
past  40  years.  It  currently  has  EUR  350  billion  in  outstanding  liabilities,  of  which  over  EUR  300 
billion  have  been  issued  since  2020  (with  the  rest  issued  during  the  previous  decade).  The 
Commission uses the proceeds of EU-Bond issuances to fund several EU spending programmes and 
instruments.  Landmark  programmes  and  instruments  funded  by  EU-Bonds  include:  (i)  SURE  to 
finance  short-term  employment  schemes  across  the  EU  and  keeping  people  in  jobs  during  the 
coronavirus  pandemic;  (ii)  the  NextGenerationEU  recovery  instrument  to  finance  a  collective  EU 
response  to  the  pandemic;  and  (iii)  the  financial  support  to  Ukraine  through  macro-financial 
assistance (MFA)1. 

NextGenerationEU  is  a  temporary  instrument,  under  which  the  Commission  can  raise  up  to  EUR  806.9 
billion between mid-2021  and  2026  by issuing  EU-Bonds, making the  EU  one of the largest issuers  of 
euro-denominated debt for the coming years. Up to EUR 250 billion will be raised by issuing green bonds. 
The proceeds of the bond issuance will enable the EU to overcome the immediate recovery challenges and 
accelerate  the  green  transition  and  the  digitalisation  of  the  EU  economy.  To  date,  more  than  EUR  138 
billion has already been disbursed to Member States under the Recovery and Resilience Facility (RRF) and 
the operational implementation of the recovery and resilience plans is gathering pace2. 

In 2022, the EU also issued EUR 8.7 billion to finance SURE loans to 10 Member States and EUR 7.5 billion 
to provide MFA loans to three neighbouring countries, including EUR 7.2 billion to Ukraine. In 2023, the EU 
will provide a further up to EUR 18 billion in highly concessional MFA loans to Ukraine (MFA+). These will be 
disbursed in regular instalments covering around a half of Ukraine’s short-term funding needs for 2023 as 
estimated by the Ukrainian authorities and the International Monetary Fund.  

Recourse  to  large-scale  bond  issuance,  not  only  for  NextGenerationEU  but  also  for  other 
programmes,  called  for  action  to  consolidate  the  Commission’s  debt  issuance  capabilities.  The 
decision in December 2022 by Parliament and the Council to amend the EU Financial Regulation to 
allow different policies to be financed by the diversified funding strategy is critical as this enables 
the Commission to raise funds successfully for two or more policies on a sustained basis. This step 
enables  the  Commission  to  extend  the  benefits  of  this  more  flexible  and  cost-efficient  debt 
management  established  for  the  implementation  of  NextGenerationEU  to  MFA+  for  Ukraine  and 
other  potential  future  borrowing  and  lending  programmes.  To  raise  these  funds,  the  Commission 
will  henceforth  be  issuing  EU-Bonds,  as  opposed  to  running  separately  designated  issuance  lines 
(for SURE, MFA, EFSM, NextGenerationEU) as in the past. 

This report – the third half-yearly report issued pursuant to Article 12 of Commission Implementing 
Decision  C(2022)97003  –  reviews  the  implementation  of  the  diversified  funding  strategy  the 
Commission established in 2021 to finance NextGenerationEU. In December 2022, the Decision was 
amended to extend the diversified funding strategy to other programmes as set out in the revised 
Financial Regulation.  

As this third half-yearly report covers the period 1 July 2022 to 31 December 2022, during which 
the diversified funding strategy was used only to fund NextGenerationEU, it focusses solely on the 
process implemented to raise and disburse the funding for NextGenerationEU.  

1  

2  
3  

Other  EU  programmes  financed  through  borrowing  are  balance  of  payments  assistance,  macro-financial 
assistance  to  countries  other  than  Ukraine,  and  the  European  Financial  Stabilisation  Mechanism.  These 
programmes will have smaller borrowing needs in the coming years than NextGenerationEU and MFA+ for 
Ukraine. 
For a detailed overview, see: Recovery and Resilience Scoreboard (europa.eu) 
Decision C(2022)9700 has repealed Decision C(2021)2502. The first and second semi-annual reports 
were based on Article 12 of the repealed Decision. 

2 

 
 
                                                 
It does not evaluate how the proceeds have been used, including for green expenditure, as that will 
be  covered  in  separate  reporting  exercises  in  accordance  with  the  regulations  of  each 
NextGenerationEU-funded instrument.  

This  half-yearly  report  also  includes  a  description  of  other  improvements  to  the  financing 
operations  that  took  place  in  the  second  half  of  2022,  specifically  the  launch  of  the  EU issuance 
service  and  the  publication  of  the  first  green  bond  allocation  report.  It  also  documents  the 
legislative  steps  taken  to  broaden  the  scope  of  the  diversified  funding  strategy  to  other 
programmes. Finally, it provides an outlook for EU-Bond issuance in 2023.   

The  half-yearly  report  forms  one  part  of  a  regular  flow  of  information  to  Parliament  and  the 
Council,  providing  transparency  and  accountability  on  the  implementation  of  the  unified  funding 
approach. With this  funding method  becoming  the central  approach for EU borrowing and lending 
operations  in  the  Financial  Regulation,  this  report  and  all  future  reporting  will  be  prepared  in 
accordance with Article 220a of the Financial Regulation. 

2. Implementation of the NextGenerationEU borrowing 

operations in the second half of 2022 

EXECUTION OF FUNDING PLANS 

In June 2022, the Commission announced its funding plan for the period July to December 2022. 
The plan indicated an intended issuance of EUR 50 billion in long-term bonds, to be complemented 
by short-term EU-Bill issuance. In line with this funding plan, the Commission raised an additional 
EUR 50 billion in long-term funding for NextGenerationEU in the second half of 2022, through a mix 
of  syndicated  transactions  (70%)  and  auctions  (30%).  These  transactions  have  brought  the  total 
outstanding amount of NextGenerationEU bonds to EUR 171 billion, of which EUR 36.5 billion were 
raised by issuing green bonds.  

In  addition  to  tapping  two  existing  green  bonds,  in  November  2022  the  Commission  launched  a 
fourth  green  bond  line  –  a  10-year  bond  due  on  4  February  2033  –  raising  EUR  6  billion.  These 
three  green  bond  transactions  contribute  to  building  a  highly  liquid  NextGenerationEU  green  bond 
curve in what is set to be the biggest green bond programme worldwide.  

In  the  second  half  of  2022,  the  Commission  also  issued  3-month  and  6-month  EU-Bills  to  meet 
short-term  funding  needs,  with  EUR  17.0  billion  in  EU-Bills  outstanding  at  the  end  of  December 
2022. 

DISBURSEMENTS 

On  the  back  of  these  successfully  executed  transactions,  the  EU  has  been  able  to  continue  the 
smooth  funding  of  Member  States’  recovery  plans  through  timely  disbursement  of  proceeds.  The 
Commission made all disbursements to Member States under the Recovery and Resilience Facility 
as  soon  as  they  fell  due,  on  average  within  6  working  days  after  the  authorisation  of  the 
disbursement. No delays were experienced. 

In the second half of 2022, the Commission disbursed EUR 38.3 billion to Member States under the 
Recovery and Resilience Facility. Of this, EUR 26.5 billion was in the form of grants and EUR 11.8 
billion was in the form of loans. Between the start of NextGenerationEU in the summer of 2021 and 
31 December 2022, the Commission in total disbursed EUR 138.7 billion to Member States under 
the RRF (EUR 93.5 billion in grants and EUR 45.2 billion in loans).  

3 

 
Also in the second half of 2022, the Commission transferred4 EUR 8.4 billion to the EU budget to 
contribute  to  NextGenerationEU-funded  spending  programmes  such  as  Horizon  Europe,  InvestEU 
Fund, ReactEU,  the Union Civil  Protection Mechanism (RescEU), the European Agricultural  Fund for 
Rural  Development  (EAFRD),  and  the  Just  Transition  Fund.  In  total,  since  the  start  of 
NextGenerationEU the Commission has transferred more than EUR 23.9 billion to the EU budget. 

Overall, since the start of NextGenerationEU in 2021, the Commission has made in total EUR 162.6 
billion available: EUR 138.7 billion in the form of loans and grants for Member States and EUR 23.9 
billion to the EU budget for NextGenerationEU-funded spending programmes. 

INVESTOR DEMAND AND SECONDARY MARKET LIQUIDITY 

Despite the challenging market conditions, NextGenerationEU transactions continued to enjoy strong 
market  support,  with  syndicated  transactions  in  the  second  half  of  2022  being  between  2.8  and 
10.9 times oversubscribed. The EU benefits from a well-balanced and diversified investor base with 
good representation of different types of investors from all across the world5. 

In  line  with  wider  market  dynamics,  new  issue  premiums  increased  marginally  to  around  3  basis 
points in the second half of 2022, compared to around 2 basis points in the first half of the year. 
This relatively modest price concession at issuance reflects the fact that the EU remained a regular, 
predictable  issuer  throughout  this  period.  This,  coupled  with  the  continued  strong  demand  from 
investors, is a sign of trust from the markets, and provides confidence that the EU can continue to 
place its bonds successfully. 

Quarterly secondary market turnover of EU and European government bonds (EGBs)  
(% of outstanding volume) 

EU market 

EGB EU market* (average 2020-2022) 

Source: European Commission based on Bloomberg data.  
Note: European Government Bond (EGB) market here comprises euro-area sovereigns, the European Financial Stability Fund and the 
European Stability Mechanism.  
Data for this market was not available for Q3 2022.  

4  This  amount  corresponds  to  the  transfers  made  from  the  NextGenerationEU  funding  pool.  The  actual 
disbursements  from  the  Commission  to  the  final  beneficiaries  under  the  programmes  financed  by 
NextGenerationEU may be subject to timing differences. 

5  To  date,  EU  issuances  have  in  total  attracted  more  than  1000  different  investors  from  70  different 
countries. More than 65% of investors are located in the EU, about 25% are international investors operating 
from the UK, and the remainder are other international investors, mainly based in Asia. More than 70% of 
the issued EU bonds have been going to buy-and-hold investors (i.e. fund managers, insurance companies, 
pension  funds  and  central  banks).  There  is  also  a  good  representation  of  investors  demanding  different 
maturities. Central banks and bank treasuries (which  usually prefer to invest in maturities up to 10 years) 
account for over 45% of purchases of EU bonds in the primary markets, while pension funds and insurance 
companies (which prefer maturities above 10 years) account for around 15%. 

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Secondary market liquidity of EU-Bonds is on par with that observed in the markets for European 
government  bonds  (EGBs),  relative  to  the  amounts  outstanding.  The  Commission  intends  to 
implement  measures  to  improve  liquidity  even  further,  as  explained  in  Sections  5  and  6  below. 
Reflecting the increased liquidity of EU-Bonds observed since the start of the NextGenerationEU and 
SURE programmes, the European Central Bank (ECB) announced in December 2022 that it will treat 
EU-Bonds in the same way as bonds issued by central governments and central banks under its risk 
control framework.6 This is further confirmation of the evolution in the standing of EU issuance in 
the markets. 

3. Cost of funding and liquidity balances 

COST OF FUNDING 

In the second half of 2022, interest and debt management costs increased substantially in line with 
general market conditions. Cost of funding7 for the period July to December 2022 is estimated to 
be close to 2.6% with an average maturity for long-term funding operations of around 13 years. 

The pace of increase in interest rates for all issuers including the EU has been one of the steepest 
witnessed  in  financial  markets  in  the  past  decades.  Interest  rates  on  10-year  EU-Bonds  have 
increased from 0.09% at the time of the inaugural 10-year NextGenerationEU bond in June 2021 to 
1.53%  in  May  2022,  and  to  2.82%  in  the  most  recent  issuance  in  November  2022.  Comparable 
increases  have been  observed  for  highly-rated euro-sovereign  issuers.  For  example, interest  rates 
on  10-year  German  government  bonds  increased  from  around  -0.20%  in  June  2021  to  close  to 
1.0% in May 2022, and were over 2.56% at the end of December 2022.  

SPREADS BETWEEN EU-BONDS AND BONDS OF PEER ISSUERS 

In  terms  of  pricing  against  peer  issuers,  while  the  interest  rate  spread  between  the  EU  and 
European government bonds widened in Q3, this spread significantly tightened back in Q4. Given a 
scarcity in high-quality collateral, market participants initially favoured EGBs over sub-sovereign or 
supranational (SSA) bonds, resulting in a steeper increase in interest rates of the latter. However, as 
collateral scarcity concerns abated, partly due to an increase in supply and availability of German 
government  bonds,  the  interest  rate  spread  between  the  EU  and  EGBs  also  reduced.  The  interest 
rate spread at 31 December 2022 stood at 64 basis points, down from a peak of 86 basis points in 
October, but still up from 21 basis points a year ago.  

LIQUIDITY MANAGEMENT 

The  Commission  also  continued  to  manage  its  short-term  cash  holdings  carefully  to  ensure  that 
they do not exceed amounts needed for the smooth execution of disbursements.  Over the second 
half of 2022, short-term cash holdings averaged EUR 25.1 billion, which is somewhat higher than 
the EUR 19.7 billion average in the first half of 2022. The higher average short-term cash holdings 
were  necessary  to  be  able  to make  sizeable disbursements  in the  second half  of  2022, including 
two very large payments of EUR 12 billion and EUR 21 billion. Liquidity holdings were also higher on 
average  due  to  slippage  in  disbursements  compared  to  plans.  Despite  the  higher  amounts  of 
liquidity  holdings  and  the  evolution  of  yields  on  EU-Bills  from  negative  to  positive  rates,  liquidity 
management  has  overall  generated  a  surplus  (i.e.  positive  carry)  of  EUR  43.2  million  on  the 
NextGenerationEU cash holdings from January to end-December 2022. This surplus will be shared 

6 For more information, see: 
https://www.ecb.europa.eu/press/pr/date/2022/html/ecb.pr221220_1~ca6ca2cc09.en.html 
7  The  interest  costs  incurred  under  NextGenerationEU  are  allocated  to  the  budget  and  the  Member  States 
receiving  loans  in  accordance  with  the  methodology  set  out  in  Commission  Implementing  Decision  (EU) 
2021/1095  and  its  successor  (EU)  2022/9701.  This  methodology  distinguishes  three  different  cost 
categories:  (i)  cost  of  funding  to  finance  grant  and  loan  disbursements  calculated  for  six-monthly  time 
compartments, (ii) cost of holding and managing liquidity, and (iii) administrative costs. 

5 

 
                                                 
proportionately between the EU  budget and Member States receiving RRF loans, as set  out in the 
cost allocation methodology. 

This positive carry in 2022 stems from two main sources: first, during the first half of 2022 short-
term  funding  was  issued  in  negative  territory,  accumulating  large  surpluses  with  effects  lasting 
until these instruments matured during the second half of 2022. Second, deposit remuneration on 
the  ECB  account  increased  gradually  with  raising  rates  on  EU-Bills  in  the  second  half  of  2022. 
Despite the unprecedented pace of interest rate increases, the marginal rate of all bills in portfolio 
remained  lower  than  the  deposit  rate  during  this  period,  because  of  their  legacy  effect.  Unless 
comparable interest movements occur in 2023, it can be expected that the cost of raising liquidity 
will  soon  exceed  the  interest  earned  on  the  holding,  and  liquidity  management  will  generate  a 
negative carry in the future. 

4. Other milestones in the second half of 2022 

EU ISSUANCE SERVICE 

In July  2022, the Commission launched, together  with the ECB and the National  Bank of Belgium 
(NBB),  the  process  for  setting  up  the  EU  issuance  service.  The  development  of  the  operations 
architecture of the EU issuance service is taking place currently, with implementation expected to 
start in the second half of 2023. 

With this service, the Commission will move from using a settlement system comprising commercial 
suppliers  of  settlement  services  to  a  Eurosystem-based  settlement  infrastructure.  The  EU-Bonds 
will  benefit  from  being  directly  part  of  the  payment  and  settlement  infrastructure  of  the 
Eurosystem (Target/Target2S) and they can be used more easily as collateral in the Eurosystem. In 
this  way,  EU  bond  issuance  will  be  aligned  with  the  arrangements  used  by  EU  sovereign  issuers, 
whose bond transactions are settled in central bank money. 

The  EU  issuance  service will  create  a  level  playing  field  for  all central  securities  depositories  and 
investors  that  trade  EU  issued  bonds.  With  the  EU  issuance  service,  the  Commission  equips  itself 
with a settlement process reflecting its new role as one of the largest issuers of euro-denominated 
debt. 

The ECB will act as paying agent and the NBB will act as settlement agent for all EU debt securities 
once the EU issuance service is in place. 

GREEN BOND ALLOCATION REPORT 

The Commission provides a high level of transparency around the use of proceeds from the green 
bonds  it  issues.  In  December  2022,  the  Commission  published  its  first  NextGenerationEU  green 
bond  allocation  report8.  The  report  shows  that  the  funds  raised  through  NextGenerationEU  green 
bonds are being used for sustainable investments, in full respect of the commitments undertaken 
within the NextGenerationEU green bond framework.  

As of the cut-off date of 19 October 2022 – exactly one year after the settlement of the inaugural 
NextGenerationEU  green  bond  –  NextGenerationEU  green  bonds  are  financing  an  eligible  pool  of 
823 measures, corresponding to almost EUR 185 billion, or to over 30% of the NextGenerationEU 
funds committed to date. To date, most of the proceeds disbursed have been allocated for Member 
States’  policies  on  clean  transport  and  infrastructure  (55.6%),  followed  by  spending  on  energy 
efficiency  (33.4%).  In  geographical  terms,  the  main  green  spending  to  date  has  been  incurred  in 
Italy (50.7%), followed by France (37.5%). The report also documents strong alignment of measures 
financed  by  NextGenerationEU  green  bonds  with  the  economic  activities  set  out  in  the  EU 
Taxonomy.  Measures  in  the  intervention  fields  that  can  be  considered  fully  aligned  or  compliant 

8 SWD_2022_442_F1_STAFF_WORKING_PAPER_EN_V4_P1_2417689.PDF (europa.eu) 

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with  the  main  substantive  Taxonomy  conditions  and  that  at  least  partially  cover  the  Taxonomy’s 
specific ‘do no significant harm’ (DNSH) conditions  represent about EUR 107.1 billion or 57.9% of 
the total green bond eligibility pool9. 

The Commission will continue to publish allocation reports once a year until all proceeds have been 
allocated to green and sustainable measures. In addition, at the end of 2023 the Commission will 
publish  its  first  NextGenerationEU  green  bond  impact  report,  in  which  it  will  present  how  the 
amounts raised are contributing to delivering on relevant climate transition metrics.  

Real-time  information  about  the  allocation  of  proceeds  from  NextGenerationEU  green  bonds  will 
continue  to  be  available  under  the  NextGenerationEU  green  bond  dashboard10,  which  provides  an 
unparalleled  degree  of  transparency  to 
investors  about  how  the  financing  raised  via 
NextGenerationEU green bonds is invested. 

Clean transport & infrastructure 

Energy efficiency 

Climate change adaptation 

Clean energy and network 

Other 

Water & waste management 

Research and innovation activities supporting 
the green transition 

Nature 
biodiversity 

protection, 

rehabilitation 

and 

Digital  technologies  supporting  the  green 
transition 

Source: Green bond allocation report 
* Based on Member State allocation of EUR 13.5 billion of green bond proceeds to eligible expenditures. 

5. Implementing a unified funding approach 

In December 2022, Parliament and the Council amended Article 220a of the Financial Regulation to 
allow  the  Commission  to  broaden  the  diversified  funding  strategy  to  other  EU  borrowing 
programmes.  Under  this  new  ‘unified  funding  approach’,  the  Commission  will  be  issuing  single-
branded ‘EU-Bonds’, rather than separately denominated bonds for individual programmes such as 
NextGenerationEU, SURE, and MFA.  

This  single  EU-Bond  label  allows  the  Commission  to  plan,  execute  and  communicate  all  its 
issuances in an agile and coherent way. The funding plan and annual borrowing decision will cover 
all programmes financed through the unified funding approach, giving Parliament, the Council and 

9 Measures in intervention fields that are at least compliant with some of the Taxonomy conditions but that 
do not cover the additional DNSH conditions represent about EUR 67.7 billion or 36.6% of the total green 
bond  eligibility  pool  size.  Measures  in  intervention  fields  that  are  not  aligned  with  or  not  covered  by  the 
Taxonomy  represent about EUR  10.2 billion or 5.5% of the total pool size.  Even  so, these  measures often 
have  a  positive  impact  on  climate.  Where  this  has  been  confirmed  by  the  RRP  assessment  and  the 
NextGenerationEU  green  bond  due  diligence  process  these  measures  have  been  retained  in  the 
NextGenerationEU green bond eligible expenditure pool. 

10 NextGenerationEU Green Bond Dashboard | European Commission (europa.eu) 

7 

 
 
 
 
                                                 
investors a comprehensive overview of the EU’s upcoming borrowing. Therefore, future editions of 
this half-yearly report will report on all EU borrowing and lending programmes financed through the 
unified funding approach. 

The  Commission  will  collect  all  proceeds  of  EU-Bonds  in  a  central  funding  pool  and  internally 
allocate  them  to  various  policy  programmes  funded  through  bond  issuances.  This  will  avoid  the 
fragmentation of EU issuances and support a more homogenous secondary market for EU-Bonds, 
as the single-branded EU bonds will be easier to buy, sell and substitute in investors’ portfolios. This 
will  help  make  EU  securities  more  liquid,  and  improve  their  pricing  and  trading  in  the  secondary 
market. 

The  unified  funding  approach  will  enable  the  Commission  to  use  the  full  range  of  its  funding 
instruments (EU-Bonds and EU-Bills) and funding techniques (syndications and auctions) developed 
for  NextGenerationEU  to  cover  its  funding  needs  for  other  lending  programmes.  In  this  way,  the 
Commission  will  be  able  to  obtain  more  attractive  conditions,  which  will  be  passed  on  to  the 
beneficiaries of its funding programmes. The Commission will have greater flexibility on the timing 
of disbursements and thus will be able to better address beneficiaries’ needs. 

A  further  advantage  of  this  step  is  that  the  robust  risk,  compliance  and  governance  framework 
introduced for NextGenerationEU and overseen by a specially-appointed Chief Risk Officer (CRO) will 
be  extended  to  all  borrowing  and  lending  operations.  Under  this  risk  governance  framework,  the 
CRO frames the Commission’s strategic risk objectives, risk appetite and risk tolerance levels, and 
identifies  the  main  financial  and  non-financial  risks  stemming  from  NextGenerationEU  operations 
and  the  processes  for  risk  management,  monitoring,  and  mitigation.  The  CRO  will  also  provide 
opinions on the half-yearly funding plans and monthly borrowing instructions and will monitor the 
risk  parameters  on  a  regular  basis.  The  legal  documentation  (the  ‘Debt  Issuance  Programme’) 
underpinning  the  EU’s  unified  issuance  approach  will  also  be  revised  in  the  first  half  of  2023  to 
reflect the programme’s scope and new features. 

The  Commission  will  continue  to  finance  the  green  component  of  the  RRF  at  the  heart  of 
NextGenerationEU  through  clearly  and  separately  designated  NextGenerationEU  green  bond 
issuances.  In  this  way,  investors  will  remain  able  to  verify  that  proceeds  from  green  bonds  are 
matched  over  time  to  eligible  green  bond  expenditures  in  accordance  with  the  NextGenerationEU 
green bond framework.  

For  financial  assistance  programmes  for  which  the  basic  acts  enter  into  force  on  or  after  9 
November  2022,  back-to-back  funding  will  remain  an  option  on  an  exceptional  basis  when 
warranted by specific transaction needs. 

The unified funding approach will be applied for conventional bonds.  
NextGenerationEU green bonds issuances will continue to finance only measures eligible under the NextGenerationEU 
green bond framework.  

Other policies will include existing or potential future programmes financed by EU borrowing. 

REPowerEU will rely on financing from remaining Recovery and Resilience loans. 

8 

 
 
 
 
6. Other measures to enhance the investor appeal of  

EU-Bonds 

The  new  unified  funding  approach  for  the  issuance  of  EU-Bonds,  the  launch  of  the  EU  issuance 
service, and the treatment of EU-Bonds in the same way as bonds issued by central governments 
and  central  banks  under  the  ECB’s  risk  control  framework  are  important  steps  forward  in 
consolidating the EU as a sovereign-type/super-national issuer. This process will continue in 2023, 
as  the  Commission  will  work  to  boost  further  the  liquidity  of  EU-Bonds,  to  the  benefit  of  all 
recipients of their proceeds. 

To further boost the liquidity of EU-Bonds, the Commission will take the following steps: 

  The  Commission  will  prepare  with the  banks  from  its  primary  dealer  network  a  framework 
for providing investors with pricing quotes on EU securities. These quotes will be displayed 
through the trading platforms used by financial professionals. Preparation will start in early 
2023, with a view to introducing these new quoting arrangements from summer 2023. 

 

In addition, the Commission will start building a repo facility to support market participants 
in  trading  its  bonds.  Through  the  repo  facility,  the  Commission  will  make  available  its 
securities on a temporary basis, thus helping  EU primary  dealers to provide  liquidity in EU-
Bonds. This repo facility will be implemented by early 2024. 

7. Issuance outlook for 2023 

The  2023  Annual  Borrowing  Decision  allows  the  Commission  to  issue  in  2023  up  to  a  maximum 
amount of EUR 170 billion in long-term funding and up to a maximum outstanding amount of EUR 
60  billion  in  short-term  funding.  Once  RePowerEU  pre-financing  needs  are  confirmed  later  in  the 
year,  the  Annual  Borrowing  Decision  may  need  to  be  revised  to  reflect  any  required  increase  in 
issuance. 2023 will therefore see an important increase in overall EU-Bond issuance compared to 
2022 when the Commission issued close to EUR 120 billion. 

On 19 December 2022, the Commission issued its half-yearly funding plan for the period January 
to  end-June  2023,  the  first  under  the  Commission's  new  unified  funding  approach.  Therefore  the 
funding plan covers not only NextGenerationEU, but also other borrowing and lending programmes 
that  the  Commission  intends  to  finance.  Some  features  of  the  issuance  programme  have  been 
adapted  to  allow  the  Commission  to  increase  its  overall  issuance  through  2023  notably  through 
increased frequency of transactions and larger volumes through auctions. The CRO has provided a 
positive opinion on the funding plan. 

In  the  first  half  of  2023,  the  Commission  intends  to  issue  EUR  80  billion  in  EU-Bonds, 
complemented  by  short-term  EU-Bills.  The  Commission  will  use  these  funds  to  finance 
NextGenerationEU  (around  EUR  70  billion)  and  MFA+  for  Ukraine  (around  EUR  10  billion).  Further 
issuances under existing MFA programmes of much smaller scale are also possible. 

The  target  for  the  bond  issuance  represents  a  reliable  and  conservative  estimate  based  on  the 
latest forecasts for the expected disbursements. Actual disbursements may deviate from forecasts 
in terms of precise timing and amounts in the event of unexpected delays in the implementation of 
national plans. However, any deviations should not materially affect the targets set in the funding 
plan and to date have consisted only of slippage in timing of individual disbursements. 

The  Commission  will  carefully  monitor  the  implementation  of  the  current  funding  plan  and 
absorption by the market of the increased issuance volumes. 

9 

 
8. Conclusion 

After a successful start in 2021, the past 12 months have demonstrated the Commission’s ability 
to  implement  smoothly  a  large-scale  funding  programme  even  in  more  challenging  markets.  The 
diversified  funding  strategy  –  consisting  of  the  techniques  (syndicates  and  auctions)  and  funding 
instruments  (bonds  and  bills)  used  by  sovereign  issuers  –  has  been  instrumental  in  navigating 
volatile market circumstances. However, the strengths of the issuance programme were not able to 
immunise EU issuance against the steep increase in market rates which were faced by all issuers as 
central  banks  raised  interest  rates  to  tame  persistently  high  inflation.  The  cost  of  funding  for 
NextGenerationEU  transactions  has  more  than  doubled  in  this  reporting  period,  underscoring  the 
dramatic change in interest rates through 2022.   

2023 will see the Commission further extend its presence  in debt securities markets by issuing a 
higher volume – up to EUR 170 billion  – of EU-Bonds for NextGenerationEU, as well as MFA+ for 
Ukraine.  Extending  the  diversified  funding  strategy  to  support  other  policies  is  a  critical  step  in 
enabling  the  Commission  to  generate  the  planned  volumes,  even  in  more  testing  markets.  The 
Commission  will  build  on  this  progress  by  taking  further  steps  to  consolidate  its  presence  as  a 
reliable  and  predictable  issuer  of  highly  liquid  bonds,  and  in  doing  so  reinforce  its  standing  as  a 
sovereign-style/super-national issuer. 

These steps will help to overcome the established market convention whereby  the EU is classified 
as an SSA issuer, which results in the EU paying a swap-spread premium (currently 60 basis points) 
above the rates paid by sovereign EGB issuers. This difference in pricing method for EU-Bonds has 
exacerbated  the  already  sharp  increase  in  underlying  market  rates.  Market  conventions  should 
reflect the fact that the EU is now a steady supplier of large amounts of liquid EU-Bonds on a par 
with  the  largest  highly-rated  EGB  issuers.  The  Commission  will  work  tirelessly  through  2023  to 
create  the  conditions  to  enable  EU-Bonds  to  be  priced  directly  by  the  markets  based  on  its  own 
increasingly  well-defined  and  liquid  curve  and  not  indirectly  against  the  swap  curve.  This  would 
enable EU-Bonds to be issued in the same manner as highly rated sovereign issuers, and avoid the 
need to pay the additional premium. 

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